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©MNoonan2008 Commercial Transactions Module 2 Title Summer
©MNoonan2008 This presentation and Copyright therein is the property of Maureen Noonan and is prepared for the benefit of students enrolled in the Commercial Transactions course conducted by the Law Extension Committee and is available for their individual study. Any other use or reproduction, including reproduction by those students for sale without consent is prohibited.
©MNoonan2008 This module At the end of this module we should be able to work out ….who… has property/title in goods/is the owner ….at each point in time…in all types of different situations where there are competing interests.
©MNoonan2008 TRANSFER OF PROPERTY DEFINITION OF CONTRACT OF SALE OF GOODS S. 6 SGA See also s. 24 SOGA Change in OWNERSHIP may or may not also involve change in POSSESSION Important to know POINT OF TRANSFER OF PROPERTY 1. RISK 2. BANKRUPTCY 3. RIGHTS and REMEDIES e.g. Sue for price/sue for non-acceptance? Contract avoided? Conversion/damages for non-delivery? Bailment? Damages for breach of warranty? Rejection for breach of condition? 4. TITLE OF THIRD PARTIES
©MNoonan2008 SITUATION WHERE GOODS PERISH BEFORE CONTRACT IS MADE WITHOUT KNOWLEDGE OF SELLER S.11 SOGA Where there is a contract for the sale of specific goods, and the goods without the knowledge of the seller have perished at the time when the contract is made, the contract is void. See also definition of “specific goods”in s. 5 and s. 57 ability to negative or vary implied terms and conditions (other than ss 18, 19, 20 for consumer sale s. 64)
©MNoonan2008 SITUATION WHERE GOODS PERISH AFTER CONTRACT MADE BUT BEFORE RISK PASSES TO BUYER S.12 SOGA Where there is an agreement to sell specific goods, and subsequently the goods without any fault on the part of the seller or buyer perish before the risk passes to the buyer, the agreement is thereby avoided. S.25 SOGA Unless otherwise agreed, the goods remain at the seller’s risk until the property therein is transferred to the buyer, but when the property therein is transferred to the buyer, the goods are at the buyer’s risk whether delivery has been made or not. Note provisos,discussed later in this module
©MNoonan2008 TRANSFER OF PROPERTY UNASCERTAINED GOODS - S. 21 SALE OF GOODS ACT Subject to section 25A, WHERE there is 1. A CONTRACT FOR THE SALE 2. Of UNASCERTAINED GOODS 3. NO PROPERTY in the goods 4. IS TRANSFERRED TO THE BUYER 5. UNLESS AND UNTIL 6. The GOODS ARE ASCERTAINED Jansz v. GMB Imports Pty Ltd The purported sale of tobacco. Unlicensed at the time property passed Agreement to sell only. Nothing to sell at time of agreement Agreement could not achieve what was impossible Note the significant problems in the past with buying in bulk. Note the introduction of s. 25A from 4/12/2006 to deal with the problem See also Pearson article Transfer of Property in Unascertained goods ALJ 134.
©MNoonan2008 Re Goldcorp Exchange Ltd (In Receivership) (1994) 3 WLR 199;(1994) 2 All ER 806 (PC). See text and note amendment to SOGA with introduction of s. 25A A NZ company dealt in gold coins and ingots. It sold bullion to investors-”non- allocated metal”-which would be stored and insured free of charge. The investor received a certificate of ownership and had the right on 7 days notice to take physical delivery. The Company became insolvent and did not have sufficient bullion to cover the debts. Claimants attepted to trace a proprietary interest to remaining stock of bullion. Did property pass in the bullion at the time of contract? Later, when bullion acquired by Company? No, unascertained goods. It makes no difference what the parties intended if what they intend is impossible; as is the case with an immediate transfer of title to goods whose identity is not yet known. Different category of claims by persons who had contractors with predecessor company which had stored and recorded holdings separately. After these separate holdings were consolidated en masse when the company was taken over, the Company engaged in wrongful dealing with stock that was not theirs.
©MNoonan2008 Bulk goods and s.25A of SOGA If bulk identified and buyer has paid for some or all of goods, unless parties agree otherwise property in an undivided share is transferred to buyer and buyer becomes owner in common of bulk. Undivided share = quantity of goods paid for quantity of bulk. If not enough to satisfy all shares, they are reduced proportionately. Owners in common agree to delivery of amounts due to others, not to bring action if it is and no right to compensation for shortfall.
©MNoonan2008 TRANSFER OF PROPERTY SPECIFIC OR ASCERTAINED GOODS - S. 22 SALE OF GOODS ACT WHERE there is 1. A CONTRACT FOR THE SALE 2. Of SPECIFIC or 3. ASCERTAINED GOODS 4. The PROPERTY in them is 5. TRANSFERRED to the buyer 6. AT SUCH TIME AS THE PARTIES 7. TO THE CONTRACT 8. INTEND it to be transferred For the purpose of ascertaining the intention…. Regard shall be had To the TERMS OF THE CONTRACT THE CONDUCT OF THE PARTIES and THE CIRCUMSTANCES OF THE CASE
©MNoonan2008 TRANSFER OF PROPERTY MASSEY V. ARLITZ (1923) VLR 132 Ms Arlitz agreed to buy 2,000 lbs wool When wool arrived, she refused to pay Did not correspond with samples Bill of L ading and draft for payment sent to Australia. Ms. Arlitz refused draft Plaintiff’s agent kept other documents preserving right to resell Mann J No property intended to pass prior to delivery No delivery of goods or documents Falls within s 24 of Victorian Sale of Goods Act
©MNoonan2008 TRANSFER OF PROPERTY RULES FOR ASCERTAINING INTENTION - S. 23 SOGA Unless a different intention appears RULES 1. Where unconditional contract Goods in deliverable state Property passes WHEN CONTRACT IS MADE Immaterial that payment, delivery postponed 2. Specific goods But Seller bound to do something To put them in deliverable state Property only passes when DEED DONE AND BUYER HAS NOTICE 3. Specific goods in deliverable state But, seller bound to weigh, measure, test etc To ascertain price. Property does not pass until ACT DONE AND BUYER HAS NOTICE 4. Goods on approval or on sale or return WHEN BUYER SIGNIFIES APPROVAL, ACCEPTANCE, OTHERWISE ADOPTS Or, expiration of fixed or reasonable time for return 5. Unascertained or future goods …..By description. Property passes when GOODS FITTING SAME UNCONDITIONALLY APPROPRIATED TO CONTRACT (Express or implied, before or after appropriation) Either by seller with assent of buyer Or buyer with assent of seller
©MNoonan2008 SOGA s.23-Rule 1 Bodilingo Pty Ltd v. Webb Projects P/L (1990) ASC A contract for the sale of office furniture, computers and other equipment provided for the purchase price to be paid by a deposit of $10,000 and the balance of $360,000 by ten monthly instalments of $36,000. The buyer became insolvent after the fifth instalment and the seller sought to take back the various items. Were they successful? The NSW Court of Appeal held that, since there was no contrary intention in the contract, property passed to the buyer under rule 1 at the time when the contract was made. Accordingly, the seller was not entitled to recover the goods when the buyer became insolvent (and unable to pay the balance of the purchase price in full) after payment of the fifth instalment and so lost out.
©MNoonan2008 Section 23 SOGA Rule 1 Dennant v. Skinner & Collum Auction sale of car, cheque bounced, buyer sold to innocent buyer, then 4th. Property passed on fall of hammer Nothing in conditions to negative intention. Signed document later, therefore not effective. Immaterial that payment came later
©MNoonan2008 SOGA s. 23-rule 2 Wallace v. Safeway Caravan Mart Caravan with shower to be installed. Paid. Partly installed, when stolen. Caravan not in deliverable state until delivered with functioning shower Property had not passed, at risk seller Buyer to get his money back with interest
©MNoonan2008 SOGA s. 23-rule 2 Underwood Ltd v. Burgh Castle Brick & Cement Syndicate (1922) 1 KB 343. See summary in text U agreed to sell to B a horizontal tandem condensing engine to be delivered free on rail in London. Engine weighed 30 tons and was bolted to and embedded in concrete flooring. Before delivery it had to be detached an dismantled over 2 week period at sellers expense. While engine being loaded on railway tuck, bedplate broken. B refused to accept. U brought action for price. B pleaded that property had not passed. Rules only apply if no different intention appears. Here, proper inference that property only to pass when engine placed safely on rail. Also: Deliverable state? U argued that article was complete in itself, nothing more to do to make it an engine and therefore in a deliverable state. CA declined this interpretation. Deliverable state does not depend on mere completeness of subject matter. It depends on actual state at date of contract and terms of contract. Where vendors have to spend as much trouble …2 weeks work on it….and money as here before engine could be placed on rail, not deliverable state….
©MNoonan2008 SOGA s. 23-Rule 3 Simmons v. Swift Note too old for SGA Sale of bark at price/ton….to be reweighed…flood…price calculated on summer weight…purchaser would not pay Weighing necessary to determine price Property did not pass, at risk seller In any case, not delivered and count for goods sold and delivered inappropriate.
©MNoonan2008 SOGA s. 23-Rule 4 London Jewellers v.Attenborough Waller took jewellery "on appro" to sell to actresses, but pawned it instead Action of pledging it to pawnbroker was adoption Property passed to Waller as buyer at that point.
©MNoonan2008 Atari Corporation (UK) Ltd v. Electronics Boutique Stories (UK) Ltd (1998) QB 539 EBS bought computer games from A under a contract providing “for sale or return until 31/1/1996”. On 19/1/1996, it wrote to A advising that it would cease stocking some of the goods and that it would return the unsold stock to its central warehouse so a detailed list of returns could be prepared. A disputed the right of EBS to return the goods. The Court held that where the goods were delivered on a sale or return basis, the buyer holds them as a contractual bailee and any notice of rejection given before the time fixed for return is sufficient. It does not have to be in writing, nor does it have to identify the goods precisely-so long as it allows them to be identified. Finally, the goods do not have to be physically returned (or be capable of return) when the notice is given- provided they can be collected within a reasonable time thereafter. The critical consideration is whether there had been clear notice of rejection before the date fixed for return-and there had been. Therefore A had to accept the return.
©MNoonan2008 Poole was car dealer who let his salesman put 2 cars in yard of his brother over holidayperiod. Could be sold if prices paid to Poole. One sold and price paid. Despite reminders, no return of the second car. Ultimatum passed. Refused to take it back Not returned within a "reasonable" time on particular facts Property passed. Note car was damaged. SOGA s.23 Rule 4(b) Poole v. Smith’s Car Sales
©MNoonan2008 SOGA s. 23 Rule 5 Pignataro v. Gilroy (1919) 1 KB 459 Seller sold 140 unascertained bags of rice Buyer paid for the rice and asked for delivery Seller advised 125 bags ready for collection at one place and 15 at another. Buyer collected the 125, but left the others for a month by which time they were stolen. Who bears the loss? Implied assent of buyer to appropriation to contract from particular circumstance where buyer had asked for delivery. Property passed, and therefore rice at buyer’s risk.
©MNoonan2008 Carlos Federspiel & Co SA v. Charles Twigg & Co Ltd (1957) 1 Lloyds rep 240-Rule 5 Parties contracted for sale of bicycles “FOB Liverpool”. Buyer paid for them and Seller made a number of preparations for shipment, even marking boxes with port of destination and buyers name-but they were never shipped because sellers went into liquidation. The Buyers claimed the goods, arguing that they had “unconditionally appropriated to the contract” and therefore, property had passed under Rule 5. They failed. Although there had been preparations to ship the goods, this did not amount to “unconditional appropriation”. Sellers could have changed their mind and used goods for another contract, or used other goods for this contract. Also, because it was FOB, (under which Seller bears risk until goods on ship), parties had not intended property to pass until shipment.
©MNoonan2008 Wardar’s (Import & Export) Co Ltd v. W Norwood & Sons Ltd (1968) 21 All ER 602-Rule 5 Sellers had 1,500 cartons frozen kidneys of which they had sold 600. On morning of 14/10/1964, seller’s agent gave buyer’s carrier delivery note authorising him to collect 600 cartons. Carrier went to the cold store at 8am and found 600 cartons on the pavement. The cartons loaded onto lorry. Loading completed at noon. After morning tea break at 10am carrier noticed the cartons dripping. He switched on lorry refrigeration which became effective at about 3pm. When signing for the cartons at noon, carrier added a note “in soft condition”. When the cartons arrived in Glasgow next day, kidneys were unfit for human consumption. Buyers sued sellers for damages for breach of implied conditions -fitness for purpose and merchantable quality- and sellers sued buyers for the price. It was held that this was a sale of unascertained goods. Therefore property could not pass until goods were ascertained. This had taken place when the 600 cartons were taken out of cold store and placed on the pavement some time before 8am on 14/10. Property in the goods and therefore the risk passed to the buyers either when the goods were placed on the pavement, or at the latest when the buyers agent called at 8am, presented his delivery docket and began loading. In either view, damage occurred subsequently and the buyers therefore bore the loss and had to pay the price.
©MNoonan2008 Matthew Short & Associates Pty Ltd v. Riviera Marine (International) Pty Ltd (2001) NSWCA 281 Riviera (R) contracted to build a motor cruiser for Boland, a Californian ship broker, to specifications supplied by his client. The cruiser 34/18 was built and to be exported through Port Botany. R contracted with Short (S) to arrange shipment by freighter. R took the boat to the parking area at Pt Botany on a semi. Because of IR, R could not take its semi to the freighter. S arranged for Botany Cranes to lift boat from the semi onto Campbell’s (C ) low loader. C’s driver drove under an archway and the superstructure of the boat struck a sign and was damaged. Who owned the boat and so who bore the loss? At the time of the contract 34/18 was “future goods” and “unascertained goods” C argued that s. 23 rule 5 applied and property in the cruiser passed when it was unconditionally appropriated to the contract by the seller with the assent of the buyer when it was delivered to a carrier or other bailee (S or C) without reservation of a right of disposal for the purpose of transmission to the buyer. This was rejected. The only carrier was the freighter owner. See text summary.
©MNoonan2008 SOGA s.24 Reservation of right of disposal Where there is a contract for the sale of specific goods, or where goods are subsequently appropriated to the contract, the seller may by the terms of the contract or appropriation reserve the right of disposal of the goods until certain conditions are fulfilled. In such case, notwithstanding the delivery of the goods to the buyer or to a carrier or other bailee for the purpose of transmission to the buyer, the property in the goods does not pass to the buyer until the conditions imposed by the seller are fulfilled. Where goods are shipped and by the bill of lading the goods are deliverable to the order of the seller or the seller’s agent, the seller is prima facie deemed to reserve the right of disposal. Where the seller of goods draws on the buyer for the price and transmits the bill of exchange and bill of lading to the buyer together to secure acceptance or payment of the bill of exchange, the buyer is bound to return the bill of lading if the buyer does not honour the bill of exchange, and if the buyer wrongfully retains the bill of lading the property in the goods does not pass to the buyer.
©MNoonan2008 Reservation of title The ownership of the goods supplier to the buyer shall remain with the seller until payment in full…if such payment is overdue in whole or in part the seller may recover or re sell the goods or any part of it and may enter upon the buyer’s premises for that purpose.
©MNoonan2008 Reservation of title -a.k.a.ROT clause, Romalpa Clause Why do businesses use them? To place a supplier of goods at the head of the scheme of distribution in insolvency/liquidation of a buyer. Normally, distribution scheme under insolvency laws is-fixed charge holders, expense of winding up, employees and ATO, preferential creditors, unsecured creditors, shareholders. If a supplier has successfully used an ROT clause, the goods still belong to it and so it can take them back on insolvency. Compaq Computer v. Abercorn Group (1993) BCLC 602 per Mummery J. “The broad purpose of an agreement that a seller retains title to goods pending payment of the purchase price and other moneys owing to him is to protect the seller from the insolvency of the buyer in circumstances where the price and other moneys remain unpaid. The seller’s aim in insisting on a retention of title clause is to prevent the goods and the proceeds of sale of the goods from becoming part of the assets of an insolvent buyer, available to satisfy the claims of the general body of creditors.”
©MNoonan2008 The order of things- Which number would you rather be? 1. Fixed charge holders and ROT holders 2. Expenses of winding up 3. Preferential creditors 4. Floating charge holders 5. Unsecured Creditors 6. Shareholders
©MNoonan2008 View of a Receiver “Even if the ROT is valid, possession of goods actually is a much stronger weapon. You know if your insolvency practitioner has got possession of some goods and the supplier says we have ROT, then you are going to say: “Prove it and lets see the documentation”… and unless it is cast iron you can actually drag that out for some considerable period until such time as, really, the goods are no good to anybody. I remember a case when I was sitting on a huge pile of jeans. By the time we actually resolved the problem…I mean these had flared bottoms, they were no damn use to anybody.”
©MNoonan2008 Reservation of title -a.k.a.ROT clause, Romalpa Clause A seller may not be able to rely on the ROT clause if: Title is not actually reserved. See BHP ROT clause not incorporated into Contract. The goods supplied under the ROT clause have been sold. The goods have been mixed with other goods, altered or used in manufacture-accessio, confusio, consumption, incorporation in a building. ROT clause may be interpreted as a “charge”.
©MNoonan2008 BHP v. Robertson (Australia) p/L (Admin appt) & ors (2002) NSWSC 336 BHP sold steel products to Robertson who subsequently sold assets and undertaking to D2. Court found, when construed as a whole, a power of sale existed. “if you sell, you do so as my agent”=“you may sell as my agent”. Commercial reality leans against concept that goods must lie idle while money is found to pay for them. Discusses possibility of inconsistency of attempt to retain title in this context. D2 was either agent for BHP on sale or was already the owner (because of inconsistency of concept with retention of title). Therefore title had passed from BHP to new owner.
©MNoonan2008 Associated Alloys clause - Reservation of Title It is expressly agreed and declared that the title of the subject goods/product shall not pass to the Buyer until payment in full of the purchase price. The Buyer shall in the meantime take custody of the goods/product and retain them as the fiduciary agent and bailee of the Seller. The Buyer may resell but only as a fiduciary agent of the Seller. Any right to bind the Seller to any liability to any third party by contract or otherwise is however expressly negatived. Any such resale is to be at arms length and on market terms and pending resale or utilization in any manufacturing or construction process, is to be kept separate from its own, properly stored, protected and insured. The Buyer will receive all proceeds whether tangible or intangible, direct or indirect of any dealing with such goods/product in trust for the Seller and will keep such proceeds in a separate account until the liability to the Seller shall have been discharged. The Seller is to have power to appropriate payments to such goods and accounts, as it thinks fit notwithstanding any appropriation by the Buyer to the contrary. In the event that the Buyer uses the goods/product in some manufacturing or construction process of its own or some third party, then the Buyer shall hold such part of theproceeds of such manufacturing or construction process as relates to the goods/product in trust for the Seller. Such part shall be deemed to equal in dollar terms the amount owing by the Buyer to the Seller at the time of the receipt of such proceeds.
©MNoonan2008 RETENTION OF TITLE - VIENNA CONVENTION Roder Zelt-Und v. Rosedown Park (1995) 57 FCR 216 German seller & Australian buyer entered into international commodity contract with retention of title clause. No choice of law clause to make clear which law applie. So, court must determine which law applies and then interpret the clause according to that law. Article 4 of the Vienna Convention makes clear that except as provided for in the Convention, it is not concerned with “The effect which the contract may have on the property in the goods sold”. Article 7 states that in questions of interpretation, regard is to be had to its international character and the need to promote uniformity and good faith in international trade. Rules of private international law are to be applied in the absence of specific coverage. Evidence of a German expert on German law was accepted that lex re sitae applied (where property situated). So, the property effect of the agreement is determined by German law for as long as the items are in Germany and by Australian law once the goods have arrived in Australia. Under German law, effect of title retention clause is that a condition precedent to transfer of title is payment in full. Title only passes when the purchase price is paid in full. Under Australian (NSW) law, the Sale of Goods Act provisions would apply and the cases dealing with the status (security?) of retention of title clauses might be relevant.
©MNoonan2008 SOGA s. 25. Risk prima facie passes with property Unless otherwise agreed, the goods remain at the seller’s risk until the property therein is transferred to the buyer, but when the property therein is transferred to the buyer, the goods are at the buyer’s risk, whether delivery has been made or not; Provided that where delivery has been delayed through the fault of either buyer or seller, the goods are at the risk of the party in fault as regards any loss which might not have occurred but for such fault Provided also that nothing in this section shall affect the duties or liabilities of either seller or buyer as a bailee of the goods of the other party.
©MNoonan2008 Proviso s. 25SOGA-Passing of Property and risk. ALLIED MILLS LTD V. GWYDIR VALLEY OILSEEDS (1978) 2 NSWLR 26 Gwydir agreed to buy 130 tons of linseed meal. Property to pass on making of contract in February. Allied deliberately did not deliver 100 tons as planned. Destroyed by Fire in March. Gwydir had to buy elsewhere for $30/ton more. Hutley JA s. 25 Sale of Goods Act Property (and therefore risk) transferred to buyer subject to PROVISO Where Delivery delayed through fault of either buyer or seller, goods are at risk of party in fault as regards any loss which might not have occurred but for such fault. Allied at fault. Allied responsible for loss. Nothing in this section shall affect the duties or liabilities of either seller or buyer as a bailee of the goods of the other party Was seller a bailee? Yes, bailee for reward. Allied cannot take advantage of its own wrong. Bailee liable unless it establishes it took reasonable care Allied had not discharged that burden.
©MNoonan2008 VIENNA CONVENTION PASSING OF RISK Article 66 Loss of or damage to the goods after the risk has passed to the buyer does not discharge him from his obligation to pay the price, unless the loss or damage is due to an act or omission of the seller.
©MNoonan2008 VIENNA CONVENTION PASSING OF RISK Article 67 If the contract of sale involves carriage of the goods and the seller is not bound to hand them over at a particular place, the risk passes to the buyer when the goods are handed over to the first carrier for transmission to the buyer in accordance with the contract of sale. If the seller is bound to hand the goods over to a carrier at a particular place, the risk does not pass to the buyer until the goods are handed over to the carrier at that place. The fact that the seller is authorized to retain documents controlling the disposition of the goods does not affect the passage of the risk. Nevertheless, the risk does not pass to the buyer until the goods are clearly identified to the contract, whether by markings on the goods, by shipping documents, by notice given to the buyer or otherwise.
©MNoonan2008 VIENNA CONVENTION PASSING OF RISK Article 68 The risk in respect of goods sold in transit passes to the buyer from the time of the conclusion of the contract. However, if the circumstances so indicate, the risk is assumed by the buyer from the time the goods were handed over to the carrier who issued the documents embodying the contract of carriage. Nevertheless, if at the time of the conclusion of the contract of sale the seller knew or ought to have known that the goods had been lost or damaged and did not disclose this to the buyer, the loss or damage is at the risk of the seller.
©MNoonan2008 VIENNA CONVENTION PASSING OF RISK Article 69 In cases not within articles 67 and 68, the risk passes to the buyer when he takes over the goods, or, if he does not do so in due time, from the time when the goods are placed at his disposal and he commits a breach of contract by failing to take delivery. However, if the buyer is bound to take over the goods at a place other than a place of business of the seller, the risk passes when delivery is due and the buyer is aware of the fact that the goods are placed at his disposal at that place. If the contract relates to goods not then identified, the goods are considered not to be placed at the disposal of the buyer until they are clearly identified to the contract.
©MNoonan2008 VIENNA CONVENTION PASSING OF RISK Article 70 If the seller has committed a fundamental breach of contract articles 67, 68 and 69 do not impair the remedies available to the buyer on account of the breach.
©MNoonan2008 VIENNA CONVENTION PASSING OF RISK Article 25 A breach of contract committed by one of the parties is fundamental if it results in such detriment to the other party as substantially to deprive him of what he is entitled to expect under the contract, unless the party in breach did not foresee and a reasonable person of the same kind in the same circumstances would not have foreseen such a result.
©MNoonan2008 Incoterms -International Chamber of Commerce 13 Incoterms; 4 main groups E-Ex Works means delivery is at sellers premises. Risk passes at those premises. F-seller is obliged to hand over goods to named carrier. FOB (Free on Board) Seller obliged to put goods on board at his expense. He pays for costs of delivery such as handling and loading. Responsibility of buyer to select ship, make contract of carriage and pay for freight, insurance and customs. Risk and property normally pass when goods pass the rail of the ship. C-seller is responsible for carriage and usually insurance. CIF (Cost, Insurance, Freight). Seller organises shipment to stipulated destination, chooses ship, organises documentation and insurance. Price of goods includes cost of goods plus insurance and freight. After shipment, seller transfers rights under carriage and insurance contracts to buyer by delivering bill of lading and other documents. Risk may pass at shipment, with property passing when documents are handed over. D-concerned with place of delivery. DDP=Delivered Duty Paid. Seller responsible for risks pre delivery and seller must deliver to named place in import country with all costs and duty paid.
©MNoonan2008 The Nemo dat rule ---no one can pass a better title than they themselves have. If the Seller does not have property in the goods when it is agreed to pass, normally the nemo dat rule would apply and title would not pass to the buyer. However, the buyer would have remedies against the Seller for breach of Contract. In specified circumstances ONLY (exceptions to the nemo dat rule), a true owner may lose title to a third party acting bona fide, where the true owner has given possession of goods or documents of title to goods (constructive possession) to a person.
©MNoonan2008 TRANSFER OF TITLE BY NON-OWNER - THIRD PARTY RIGHTS GENERAL RULE - NEMO DAT No one can pass a better title than they themselves have EXCEPTIONS · To protect commercial transactions and innocent third parties S. 26 SGA: SALE BY PERSON NOT THE OWNER · Confirms nemo dat rule - Subject to exceptions Estoppel Factors Act Special powers of sale S. 27 SGA SALE UNDER VOIDABLE TITLE · Sale effect if conducted prior to avoidance S. 28 SGA SELLER OR BUYER IN POSSESSION · Floorplan arrangements - Consignment S.5 FACTORS (MERCANTILE AGENTS) ACT 1923 · Powers of a Mercantile Agent S.9 REGISTRATION OF INTERESTS IN GOODS ACT
©MNoonan2008 SOGA s. 26 SALE BY NON-OWNER SOGA 26. (1) Subject to the provisions of this Act, where goods are sold by a person who is not the owner thereof and who does not sell them under the authority or with the consent of the owner, the buyer acquires no better title to the goods than the seller had, unless the owner of the goods is by the owner's conduct precluded from denying the seller's authority to sell. (2) Nothing in this Act shall affect: (a) the provisions of the Factors (Mercantile Agents) Act1923 or of the Registration of Interests in Goods Act 1986; (b) the validity of any contract of sale under any special common law or statutory power of sale, or under the order of a court of competent jurisdiction.
©MNoonan2008 Bona fide third party exceptions The third party must act bona fide, without notice of the defect in title. See International Alpaca Management P/L v. Ensor (1995)133 ALR 561. The burden of proving exceptions apply is on the person making the claim against the true owner. For owner to be precluded by conduct from denying the authority of Seller, third party must be induced to acquire goods by reason of representation by owner that Seller has authority to sell. Merely entrusting another with possession, even with documents of title, does not constitute conduct which would preclude the true owner from asserting title against a bona fide purchaser. Where the representation not that of owner, they may still lose title if their negligence has allowed representation to be made. For estoppel by negligence, owner must breach a duty of care owed to third party, based on same principles as negligence, although this extra duty has been criticised and may not continue to apply at some future time. See Mercantile Credits Co Ltd v. Hamblin, text Thomas Australia Wholesale Vehicle Trading Co P/L v. Marac Finance Australia Ltd text Note:This does not apply with respect to motor vehicles any more because the law has been changed by statutes introducing registers for the public registration of title.
©MNoonan2008 TRANSFER OF TITLE BY NON-OWNER EASTERN DISTRIBUTORS V. GOLDRING (1957) 1 QB 600 Murphy owned a Bedford, gave documents to Coker, Murphy kept possession Bedford. Documents enabled Coker himself as owner. Coker sold Bedford to Eastern. Murphy sold Bedford to Goldring 6 weeks later English equivalent of s. 26(1) Owner (Murphy) by his conduct precluded from denying Coker’s authority to sell? Goldring argued Murphy and Coker would have been estopped, but not him! Devlin J Directly within s. 21=NSWSOGA s. 26(1) Coker armed with apparent authority Enabled him to represent himself as owner with right to sell Murphy precluded from denying Coker’s authority to sell Coke able to give title to Eastern Murphy had no title left to pass to Goldring
©MNoonan2008 TRANSFER OF TITLE BY NON-OWNER THOMAS AUSTRALIA WHOLESALE VEHICLE TRADING CO V. MARAC FINANCE AUSTRALIA (1985) 3 NSWLR 452 Barclays owned a Mercedes and leased it to International International sold to Thomas, who sold it to Marac Barclays repossessed. Marac sued Thomas. Nature of Estoppel by negligent conduct? Did owner owe him a duty of care? Majority judgement CA, NSWSC s.26 a codification of existing law so thrown back on common law estoppel duty required where owner negligent-here Barclays had failed to police requirement to be kept in lessee’s possession and control, no label or mark to show it belonged to Barclays, failure to prevent registration in a name other than lessee. No duty in this case, so none breached by Barclays Note: case before RIGA and “registrable interest” including a lease.
©MNoonan2008 SOGA s. 27 Sale under voidable title Where the seller of goods has a voidable title thereto but the seller's title has not been avoided at the time of the sale, the buyer acquires a good title to the goods, provided the buyer buys them in good faith and without notice of the seller's defect of title.
©MNoonan2008 Exceptions to nemo dat Where there is a voidable title, the true owner is able to repudiate by taking all possible immediate steps to regain the goods, even though he cannot find or communicate with “the rogue”, in contrast with the common law which usually requires that rescission of a contract be actually communicated to the other party. Car and Universal Finance Co Ltd v. Caldwell (1965) 1 QB 525
©MNoonan2008 CAR AND UNIVERSAL FINANCE CO V. CALDWELL (1965) 1 QB 525 Caldwell agreed to sell Jaguar to Norris. Norris paid by cheque. Caldwell allowed Norris to take Jaguar.Cheque dishonoured. Caldwell immediately informed police and AA. Norris sold to Motobella, with notice of defect.Motobella sold to McGhie to Car & Universal. VOIDABLE TITLE?NEED TO COMMUNICATE RESCISSION? Sellers LJ Necessary to consider particular circumstances Communication an impossible task for seller He has to establish, clearly and unequivocally That he terminates the contract Here, on discovering fraud he took all possible steps to regain the goods Even if he could not find rogue nor communicate with him
©MNoonan2008 SOGA s.28 Seller or buyer in possession after sale 28. (1) Where a person having sold goods continues or is in possession of the goods or of the documents of title to the goods, the delivery or transfer by that person or by a mercantile agent acting for that person of the goods or documents of title under any sale pledge or other disposition thereof to any person receiving the same in good faith and without notice of the previous sale shall have the same effect as if the person making the delivery or transfer were expressly authorised by the owner of the goods to make the same. (2) Where a person having bought or agreed to buy goods obtains with the consent of the seller possession of the goods or the documents of title to the goods, the delivery or transfer by that person or by a mercantile agent acting for that person of the goods or documents of title under any sale pledge or other disposition thereof to any person receiving the same in good faith and without notice of any lien or other right of the original seller in respect of the goods shall have the same effect as if the person making the delivery or transfer were a mercantile agent intrusted by the owner with the goods or documents of title. (3) In this section the term “mercantile agent” means a mercantile agent having in the customary course of business as such agent authority either to sell goods, or to consign goods for the purpose of sale, or to buy goods, or to raise money on the security of goods.
©MNoonan2008 Pacific Motor Auctions Pty Ltd v.Motorcredits (Hire Finance) Ltd (1965) AC 867 MC, a finance company, owned cars under a floorplan arrangement. M owned the cars, sold them to MC to raise operating finance, but kept them on their showroom floor as they were a car dealer. M wrongfully sold and delivered them to another dealer, PMA. It was argued by MC that there had not been continuity of possession because after the sale to MC, M had retained the cars as bailee for MC and not as owner. The PC found for PMA. It said that the expression “continues in possession” refers to physical possession “regardless of any private transactions between the seller and the purchaser which might alter the legal title under which the possession was held”.
©MNoonan2008 WORCESTER WORKS FINANCE V. COODEN ENGINEERING CO (1972) 1 QB 210 Cooden owned Zephyr. Agreed to sell to Griffiths, a motor dealer Griffiths paid by cheque, took delivery, became registered owner Cheque dishonoured Griffiths sold to Worcester, who entered HP agreement with Millerick Griffiths retained possession Cooden took it back. Griffiths acquisced. Worcester sued Cooden Lord Denning MR s.25=s28 SGA Did Griffiths continue in possession? Yes Does possession mean lawful possession? No, continuity of physical possession enough Was retaking by Cooden delivery or transfer by Griffiths? Yes Did Cooden act in good faith? Yes Without notice sale to finance company? Yes TRANSFER OF TITLE TO NON-OWNER
©MNoonan2008 Evans was a car dealer. Natwest agreed to finance on a floorplan arrangement. Evans agreed to buy 8 cars from Gamer. Evans obtained possession, but property was not to pass until cars paid for. Natwest provided finance but, Evans did not pass it on to Gamer. Gamer took the cars back and was then sued by Natwest s.28(2) SGA actual delivery required? Constructive delivery good enough? Discussion of evolution of statute from common law. Delivery interpreted in legal sense to include constructive delivery, as it did under common law. Change in character of dealer’s possession? Dealer took possession, delivered receipts to Natwest; against which cheques were drawn. Dealer then held as bailee for Natwest GAMERS MOTOR CENTRE (NEWCASTLE) V. NATWEST WHOLESALE AUSTRALIA (1987) 163 CLR 236
©MNoonan2008 FACTORS ACT SECTION 5 POWERS OF A MERCANTILE AGENT Where a mercantile agent is entrusted as such with the possession of any goods or the documents of title to goods, any sale pledge or other disposition of the goods made by the agent in the ordinary course of business of a mercantile agent shall, subject to the provisions of this Act, be as valid as if the agent were expressly authorised by the owner of the goods to make the same; Provided that the person taking under the disposition acts in good faith, and has not at the time of the disposition notice that the person making the disposition has not authority to make the same. Where a mercantile agent so entrusted continues in possession of goods or of the documents of title to goods, any sale pledge or other disposition, which would have been valid if the entrusting had continued, shall be valid notwithstanding the determination thereof, provided that the person taking under the disposition has not at the time thereof notice of such determination.
©MNoonan2008 MAGNUSSEN V. FLANAGAN (1981) 2 NSWLR 92 Mrs Flanagan owned Cobra. Peter Smythe’s Classic Care Centre was authorised to sell. Authority valid for 30 days Magnussen bought Cobra from salesman -paid two weeks later. Car was meant to be left in car park. Not done Flanagan collected the Cobra Magnussen received registration certificate in his name Flanagan refused to hand over the car Was sale by Peter Smythe in the ordinary course of business of a mercantile agent? Did Magnussen acquire without notice? Foster J. Nothing unusual about the transaction Admitted mercantile agent At business premises- Ordinary hours -Ordinary way Car to be handed over to Magnussen
©MNoonan2008 NEWTONS OF WEMBLEY V. WILLIAMS (1965) 1 QB 560 Newtons owned a Sunbeam. It agreed to sell it to Andrew. Andrew paid by cheque, took delivery and became the registered owner. Cheque dishonoured. Newtons immediately informed police and authorised 2 agents to trace the sunbeam. Andrew sold it to Biss who sold it to Williams. Newtons demanded the Sunbeam from Williams. Was it entitled to do so? Sellers LJ English Factors Act ss. 9 and 2 = s.5(1) & (2) F(MA)Act NSW No, Title had been transferred transferred Was Andrews a Mercantile agent? Yes Had Newtons left car in his possession? Yes Did it matter that it had done so unwillingly? No Was Andrew acting in the ordinary course of business? Yes Did Biss act in good faith etc? Yes
©MNoonan2008 Registration of Interests in Goods Act 1986 (NSW) Sections 9 (2) - (4) 9. (2) Where goods of a class specified in an order in force under subsection (1) are the subject of a registrable interest (whether the registrable interest arose before, or arises on or after, the day specified in the order) and the goods are purchased as provided by subsection (3) or (4): (a) the property (if any) in the goods of the creditor who has the registrable interest is divested from the creditor and vested in the purchaser: and (b) the purchaser acquires the goods freed and discharged from the registrable interest. (3) Goods are purchased as provided by this subsection if the goods are purchased: (a) by a person who is not a dealer in the goods from a dealer in the goods; (b) except as provided by paragraph (c) - in good faith and for value; and (c) with or without notice of the registrable interest. (4) Goods are purchased as provided by this subsection if the goods are purchased otherwise than as referred to in subsection (3)(a): (a) from the debtor under the registrable interest to which the goods are subject; (b) in good faith and for value; and (c) without notice, at the time of payment of the purchase price, of the registrable interest.
©MNoonan2008 Advance Investment Finance (1.) Pty Ltd v The Commissioner for Consumer Affairs for NSW (1992) ASC Advance Bank (“AB”) loaned money to Mr Dovellos (“ D”) to buy a car; over which he would give a legal mortgage to AB. Mr Kemple sold Mercedez Benz to Mr D, who said he was buying it for his wife. At request of Mr D, Kemple wrote Keson Pty Ltd as purchaser on transfer registration. State Bank (SB) bought car from Keson under lease back arrangement. At this point, AB had not registered its interest in the car. SB attempted to sell car at auction after Keson defaulted, but sale did not occur as SB came to know of interest of AB. Is there a “registrable interest”? Property passed to D, 22/12/1989 when he handed Mr Kemple cheque for $57, His request that “the name of one of my companies rather than my own name” be written on form was subsequent to completion of sale.Whether AB acquired an interest in the vehicle to be answered by reference to circumstances in which $57, advanced. The loan contract could only amount to an agreement to give a mortgage over the vehicle if and when goods answering description were acquired--so, as soon as D acquired property and legal title to vehicle, property vested in equity in AB. AB therefore had a “security interest” and thus “registrable interest”.
©MNoonan2008 Advance Investment Finance (1.) Pty Ltd v The Commissioner for Consumer Affairs for NSW (1992) ASC cont (2) Has AB’s “registrable interest” been defeated? “Purchase” defined s.3(1) includes the acquisition of goods from a person purporting to have authority to sell the goods and includes the acquisition of the vehicle by the SB from Keson. It was not from a dealer and so we apply subsection (4) of Section 9 subject to (7). AB’s interest was not defeated because SB was not able to bring itself within any of the provisions of RIGA. Was purchase made in good faith for value and without notice of “registrable interest”? We look at Section 3 (3) which provides “for the purposes of this act, a person is without notice of a “registrable interest” only if under Section 164 of the Conveyancing Act (read subject to Section 8 of this Act) the person is not prejudicially affected by notice of the interest”. The effect of this is that subject to Section 8 (3), “a purchaser is taken to have notice of a “registrable interest” where it is within his or her own knowledge or that of their counsel, solicitor or other agent or would have come to his or her knowledge...if such searches, enquiries and inspections has been made as ought to have been made”.
©MNoonan2008 Advance Investment Finance (1.) Pty Ltd v The Commissioner for Consumer Affairs for NSW (1992) ASC cont (3) In a case like this, where a purchaser has not obtained search, they are put on constructive notice of interest that would have been revealed had search been undertaken. In the present case AB had not registered an interest and accordingly the SB did not have notice, actual or constructive, of that interest. As Keson was not debtor within 9(4)(a) and not in possession of vehicle at time of sale, purchase by SB was not a purchase from a person other than the debtor who is in possession of the goods in circumstances where the debtor’s right to possession of the goods has been lost or the debtor is estopped from asserting that right against the purchaser. SB also relied on 26 (1) of the SOGA by asserting that AB and or D were estopped from denying the authority of Keson to sell. As a reference to the owner should be read as a reference to the legal owner and not the beneficial or equitable owner, it is only necessary to consider the conduct of D, and not AB in terms of 26 (1). The Tribunal did not find evidence of estoppel.
©MNoonan2008 Associated (seller) sold steel to CAN 001 (buyer) between 1981 and Around 1987,88, Seller began to issue invoices with retention of title clause printed on reverse with note on front. Buyer used steel as well as other steel to make pressure vessels, heat exchangers and columns. Buyer did not pay Seller full amount, came under administration then liquidation. Bank, which held fixed and floating charge appointed receiver and manager. What are the proceeds referred to in the clause? Was trust re future receipts constituted? Interaction between trusts and other contractual relations Note that seller no longer has property because steel can no longer be ascertained -now blended in product. Proceeds were book debts…charged the moment they came into existence…trust? OR Registrable charge? NSWSC said latter….void as against liquidator HC said by majority it was a trust of future acquired property not a charge; therefore not void….To treat the clause as one which falls foul of the law is to rewrite the statute Kirby dissented. However, evidence lacking of receipt and therefore failed anyway Appeal dismissed. RETENTION OF TITLE CLAUSES ASSOCIATED ALLOYS PTY LIMITED V. CAN Pty Limited 2000 HCA
©MNoonan2008 Kingsway Computer Services Conditions and Terms of Supply 3. a. The property of the Supplier in the goods remains with the Supplier until the Supplier has been paid in full for the goods under all individual contracts and terms set out in the Order or Invoice for the supply of the goods, between the supplier and the customer. b. Risk in the goods shall pass to the Customer on despatch to the Customer. c. Delivery shall occur upon the physical delivery to the Customer or if installation is required upon loading at the Customer’s premises. The Supplier is authorised to deliver and install goods at the address given to the Supplier by the Customer for that purpose and it is expressly agreed that the Supplier shall be taken to have delivered and installed the goods in accordance with its contract if that Addressee obtains from any person a receipt or signed delivery docket for the goods. 4. a. The Customer is a bailee of the goods until such time as property in them passes to the customer and that this bailment continues in relation to each of the goods until the price of the goods has been paid in full
©MNoonan2008 FEEDING THE TITLE PATTEN V. THOMAS MOTORS (1965) NSWR 1457 Miss Persch obtained a Fiat on Hire Purchase from CAGA. She sold it to Clinton Motors. The Fiat changed hands a number of times eventually being bought by Thomas Motors which sold it to Mr. Patten on 20 May On 9 August 1961, Miss Persch obtained a loan from Deposit & Investment, purporting to give that finance company a bill of sale over the Fiat. She used the loan to pay out CAGA. She failed to repay the loan to Deposit & Investment, which seized the Fiat from Mr. Patten. He sued Thomas Motors on 24 th September 1963 for damages for breach of warranty of title under s. 17 of the Sale of Goods Act without success and then appealed to the Full Court of the Supreme Court. The court affirmed the judgement of the District Court. On discharging her obligation under the HP agreement on August 9, 1961, the property in the vehicle passed from CAGA to Miss Persch and then instantaneously passed along the line of succession until it vested in Patten. So that on August 9, 1961 when Patten acquired legal title, any cause of action under s. 17 SGA was extinguished. He had no cause of action.
©MNoonan2008 ALLCO STEEL CORPORATION P/L V. ADC P/L (ADC v. Allco) SCNSW Feb 87, ADC engaged White to build Quadrant building Upon payment by (ADC) of any progress claim which includes the value of any unfixed materials, goods and equipment, property in such materials, goods and equipment shall thereupon pass to (ADC). White subcontracted with Allco for supply/installation of structural steel Where any part payment for merchandise is made by (White) the title to the property in the partly completed or completed merchandise and any materials and parts to be used in its manufacture…shall pass absolutely to (White) and the same shall be appropriately marked as the property of (White). Two lots of steel supplied by Allco to White in Oct 87 and Nov 87. ADC paid progress payments 7 & 8 to White before White paid Allco.11 August 88, ADC terminated construction agreement with White. Allco still had possession of the Oct/Nov steel and in January 89, Allco and White signed a deed of release under which Allco could keep steel. Allco subsequently sold steel and retained proceeds. ADC claimed conversion and the proceeds. CONVERSION BY ALLCO? Yes.Feeding the title applied as in Patten. Evidence did not disclose ADC had knowledge of lack of White title. Even if it did, does not defeat “feeding of title”. White steps caused ADC to believe it could transfer title.
©MNoonan2008 ASSIGNMENT OF CHOSES IN ACTION LEGAL ASSIGNMENT-CA s. 12 The assignment must be in writing signed by the assignor be absolute; not conditional or by way of security Notice must be given to the underlying obligor or debtor Consideration is not required Statutory assignments (other than WA) do not permit partial assignments or future assignments. Equity,does however, permit partial and future assignments and fewer formalities. See Norman v. FCT in text.
©MNoonan2008 ASSIGNMENT OF CHOSES IN ACTION CONVEYANCING ACT SECT 12 Any absolute assignment by writing under the hand of the assignor (not purporting to be by way of charge only) of any debt or other legal chose in action, of which express notice in writing has been given to the debtor, trustee, or other person from whom the assignor would have been entitled to receive or claim such debt or chose in action, shall be, and be deemed to have been effectual in law (subject to all equities which would have been entitled to priority over the right of the assignee if this Act had not passed) to pass and transfer the legal right to such debt or chose in action from the date of such notice, and all legal and other remedies for the same, and the power to give a good discharge for the same without the concurrence of the assignor: Provided always that if the debtor, trustee, or other person liable in respect of such debt or chose in action has had notice that such assignment is disputed by the assignor or anyone claiming under the assignor, or of any other opposing or conflicting claims to such debt or chose in action, the debtor, trustee or other person liable shall be entitled, if he or she thinks fit, to call upon the several persons making claim thereto to interplead concerning the same, or he or she may, if he or she thinks fit, pay the same into court under and in conformity with the provisions of the Acts for the relief of trustees.
©MNoonan2008 COPYRIGHT ACT SECT 196 ASSIGNMENT and LICENCES (1) Copyright is personal property and, subject to this section, is transmissible by assignment, by will and by devolution by operation of law. (2) An assignment of copyright may be limited in any way, including any one or more of the following ways: (a) so as to apply to one or more of the classes of acts that, by virtue of this Act, the owner of the copyright has the exclusive right to do (including a class of acts that is not separately specified in this Act as being comprised in the copyright but falls within a class of acts that is so specified); (b) so as to apply to a place in or part of Australia; (c) so as to apply to part of the period for which the copyright is to subsist. (3) An assignment of copyright (whether total or partial) does not have effect unless it is in writing signed by or on behalf of the assignor. (4) A licence granted in respect of a copyright by the owner of the copyright binds every successor in title to the interest in the copyright of the grantor of the licence to the same extent as the licence was binding on the grantor.
©MNoonan2008 TRADE MARKS ACT 1995 SECT Application for record of assignment etc. of registered trade mark to be entered in Register (1) If a registered trade mark is assigned or transmitted: (a) the person registered as the owner of the trade mark; or (b) the person to whom the trade mark has been assigned or transmitted; must apply to the Registrar for a record of the assignment or transmission to be entered in the Register. (2) The application must: (a) be in an approved form; and (b) be filed, together with any prescribed document, in accordance with the regulations.
©MNoonan2008 Orix Australia Corp Ltd v. Peter Donnelly Automotive P/L  NSWSC977 Case concerning SOGA ss.23 Rules 1, 5 & s. 28(2) Factors (Mercantile Agents)Act s. 5(1)
©MNoonan2008 Orix Australia Corp Ltd v. Peter Donnelly Automotive P/L  NSWSC 977 Facts: AH wanted new car. Employer offered to pay lease charges in return for salary sacrifice and put AH in touch with Buying Advisory Service (BAS). BAS placed an Order 1 for the car with D for delivery to AH. AH sent finance application and approval obtained 9/8/2005. Second quotation by D specified a higher price and COD but never sent. BAS collected vehicle, but registered in name of AH and handed over to AH. BAS issued tax invoice to P. Nobody paid D. D claimed it had retained title because of COD clause.
©MNoonan2008 Orix Australia Corp Ltd v. Peter Donnelly Automotive P/L  NSWSC977 Court analysed offer/acceptance…two quotations because of time to find the car…found that there was a contract to sell car to BAS on basis of second quotation …which operated as another offer…which then passed clear title to it to P- denied there was a C for sale to AH or no contract at all. Intention of the parties as to title?-Rules 1 and 5, but they can yield to contrary intention….COD clause-retention? Yes, such a stipulation operated to retain title, but that was defeated by s. 28(2) SOGA and s. 5 Factors Act No need to consider Registration of Interests in Goods Act argument.
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