Gamer's Motor Centre (Newcastle) Pty Ltd v. Natwest Wholesale Australia Pty Ltd
163 CLR 23672 ALR 321
(Decision by: Brennan J)
Between: Gamer's Motor Centre (Newcastle) Pty Ltd
And: Natwest Wholesale Australia Pty Ltd
Judges:
Mason CJ
Brennan JDawson J
Toohey J
Gaudron J
Subject References:
Sale of Goods
Judgment date: 24 July 1987
Sydney (heard in Canberra)
Decision by:
Brennan J
The plain purpose of s 28 of the Sale of Goods Act 1923 (NSW) ("the Act") is to give a measure of protection to third parties to whom goods or the documents of title to goods are delivered or transferred under a sale, pledge or other disposition by a seller of the goods who has parted with his property in them or by a buyer of the goods who has not acquired property in them. Sub-section (1) deals with the effect of delivery or transfer by such a seller to a third party; sub-s(2) deals with the effect of delivery or transfer by such a buyer to a third party. (In passing, it may be noted that there is some difficulty in giving meaning to the words "bought or" in sub-s(2), for the effectiveness of a delivery or transfer by a buyer who is the true owner and who delivers or transfers to a third party under a sale, pledge or other disposition needs no support from the sub-section unless, perhaps, the seller has retained a limited interest in the goods. It may be that the words are surplusage: see Atiyah, The Sale of Goods, 7th ed. (1985), p 294.) In this case the protection of s 28(2) is invoked by a third party (Natwest) in circumstances set out by the Chief Justice in his judgment. The question is whether Natwest acquired, by virtue of the operation of s 28(2), a better title to eight motor vehicles seized by Gamer than the title which Gamer had.
Section 28 prescribes exceptions to the general rule that a person who has no title to goods cannot pass title to another though he delivers the goods to the other intending to pass title. The section requires that the person who makes the delivery and who has no title to pass to the other person is a seller who continues or is in possession of the goods or is a buyer who has obtained possession of the goods with the seller's consent. For the purpose of s 28, a person is in possession of goods when he has the goods in his actual custody, the object of the section being "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": Pacific Motor Auctions Pty Ltd v Motor Credits (Hire Finance) Ltd. (1965) 112 CLR 192 , at p 202; [1965] AC 867 , at p 886.
Section 28 does not in terms validate the sale, pledge or other disposition under which a delivery of goods is made. It gives to a delivery under the relevant sale, pledge or other disposition the effect prescribed by the respective sub-sections. In the case of a delivery of goods falling within sub-s(2), the delivery by a buyer to a third party under a sale by the buyer to the third party has "the same effect as if (the buyer) were a mercantile agent intrusted by the owner with the goods". Sub-section (3) identifies the hypothetical mercantile agent as one who has, in the customary course of his 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".
Then it is necessary to go to s 5 of the Factors (Mercantile Agents) Act 1923 (NSW) ("the Factors Act") to ascertain the effect of a sale, pledge or other disposition of goods made by a mercantile agent who is "entrusted as such with the possession of any goods or the documents of title to goods", to quote the text of that section. Section 5 provides that any such sale, etc., made by such a mercantile agent "in the ordinary course of business of a mercantile agent" is -
"subject to the provisions of this Act ... as valid as if he 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."
I do not think that s 28(2) is limited to cases where the sale, etc., is made by a buyer "in the ordinary course of business of a mercantile agent". The object of the sub-section is to protect innocent third parties dealing with any buyers without title, not only buyers who are mercantile agents. The operation of the sub-section depends on the hypothesis "as if the person making the delivery or transfer were a mercantile agent", so that the business of that person is hypothetically translated into the business of a mercantile agent. Therefore s 28(2) attracts to a delivery or transfer in the ordinary course of business by that person the same effect as s 5 of the Factors Act attributes to a transfer or delivery under a sale, pledge or disposition by a mercantile agent in the ordinary course of business as a mercantile agent. That was the view taken by Reed J. in Langmead v. Thyer Rubber Co. Limited (1947) SASR 29, at p 39, and by Gresson P. and Cleary J. in Jeffcott v. Andrew Motors Ltd. (1960) NZLR 721, at p 729. If the buyer were in fact a mercantile agent, what work would s 28(2) have to do that would not be done by s 5 of the Factors Act? The effect of such a s 28(2) delivery is therefore the effect which a delivery would have if the sale, etc., under which it was made had the validity attributed to a sale, etc., by that part of the text of s 5(1) of the Factors Act which commences with the words "subject to ..." set out above. In other words, when there is no applicable qualification to be derived from other provisions of the Factors Act and when the proviso to s 5(1) of the Factors Act does not apply, a delivery of goods falling within s 28(2) has effect as though the buyer were delivering the goods under a sale, etc., which he had been expressly authorized by the owner of the goods to make.
In the circumstances of the present case, if s 28(2) applies, a delivery of the eight cars whose title is in question by Evans & Rose Motors Pty Ltd, the dealer, to Natwest under a sale to Natwest, would have effect as though the sale had been made by the dealer with the express authority of Gamer.
The Agreement between the dealer and Natwest related to used motor vehicles previously acquired by the dealer as stock: cl.1(a). It provided that the property in a motor vehicle to be sold should pass to Natwest upon payment by Natwest to the dealer of 90% of the agreed price: cl.2. The dealer agreed "(t)o take on hire every used display unit provided hereunder and keep the same in my own possession as bailee for (Natwest) for display purposes only on my showroom floor". Section 28(2) does not operate directly on the Agreement as though it applied s 5 of the Factors Act to the Agreement and deemed it to have been made with Gamer's express authority. If s 28(2) operated in that way, the property in the motor vehicles would have been transferred to Natwest pursuant to cl.2 of the Agreement at the time when the parties to the Agreement intended it to be transferred: s 22(1). The property in the motor vehicles would have been transferred to Natwest, but not by reason of their delivery. Section 28(2) has a different operation. Clearly it is intended to confer on innocent third parties - sub-buyers, pledgees and disponees - who deal with the buyer in possession a measure of protection against the true owner, but the statutory protection is more than a mere right in the third party to retain possession as against the true owner. Section 28(2) and its statutory analogues have always been understood to be effective to enable the buyer mentioned therein who subsells to give not only possession but title to an innocent sub-buyer though the subseller has no title himself to give. In Cahn v. Pockett's Bristol Channel Steam Packet Company [1899] 1 QB 643 , a buyer who obtained possession of a bill of lading with the consent of the seller but who, not having paid for the goods, had no authority to deal with the bill of lading, transferred the bill of lading to an innocent sub-buyer for a price. It was held that the sub-buyer had acquired title and that the unpaid seller was not entitled to stop the goods in transit. Against this conclusion it was objected that the subsale had been made before the buyer (the subseller) got possession of the bill of lading, the point being presumably that the subsale could acquire no validity if the subseller did not have possession of the bill of lading at the time. Collins L.J. disposed of the objection (at p 665):
"As to the point that there had been a bargain made by (the subseller) with (the sub-buyer) before the former got possession of the bill of lading, the answer is that (the sub-buyer's) title rests on the transfer of the bill of lading for cash, and not on the prior bargain."
Section 28(2) thus operates on delivery or transfer and not on the antecedent sale, pledge or other disposition under which delivery or transfer is made. No property in the goods sold, pledged or disposed of passes unless and until delivery or transfer is made. The title then acquired arises from the delivery or transfer, and not solely from an antecedent contract. Of course, a sale or disposition of goods by an owner might require - it depends on the nature of the transaction - and a pledge of goods does require delivery of the goods to effect a passing of general or special property in them to the buyer, pledgee or disponee. But the property in goods need not, and frequently does not, pass on delivery under a contract of their sale. Although a sub-buyer whose title depends on a delivery of goods falling within s 28(2) cannot rely solely on an antecedent contract for their sale as the source of his title, the title which the sub-buyer acquires on delivery can be no different from that which he would have had if the antecedent contract had been made with the owner's authority. (I omit as presently immaterial qualifications which might be imported from provisions of the Factors Act other than s 5 or which might be required when the original seller had no title.) It is only by assimilating the title which is taken on delivery with the title which the third party would then have held if the contract had been made with the owner's authority that one can predicate of the delivery that it has the same effect as if it were made by a mercantile agent intrusted by the owner with the goods or documents of title.
In this case, had the dealer been the owner of the motor vehicles, the property in them would have passed to Natwest under the Agreement and in accordance with cl.2, irrespective of delivery or the time when delivery was made. But Natwest, being unable to rely solely on the Agreement, must rely on a delivery which is capable of effecting a vesting of title to the motor vehicles in dispute.
The traditional mode of transferring property in personal chattels is by delivery of possession and that might be symbolic or constructive as well as actual: King v. Greig; Rechner, claimant (1931) VLR 413, at p 439; Dublin City Distillery, Limited v. Doherty [1914] AC 823 , at p 843. Having regard to the purpose of s 28(2), there seems to be no compelling reason why delivery of goods under the sub-section should not include symbolic or constructive delivery of possession, as well as actual delivery of possession. "It is well established", said Williams and Kitto JJ. in Akron Tyre Co Pty Ltd v Kittson (1951) 82 CLR 477 , at p 494, "that constructive delivery sufficient to pass the title in chattels may be effected by a change in the character of an uninterrupted custody". See also Minister for Supply and Development v. Servicemen's Co-operative Joinery Manufacturers Ltd. (1951) 82 CLR 621 , at p 641. The term "delivery" is defined by s 5(1) of the Act to mean "voluntary transfer of possession from one person to another" unless the context or subject matter otherwise requires, and there is no doubt that not only title but also legal possession of a personal chattel may be transferred as effectively by symbolic or constructive delivery as by actual delivery: Dublin City Distillery, Limited v. Doherty, at p 852. Although Pacific Motor Auctions Pty Ltd v Motor Credits (Hire Finance) Ltd. establishes that the purpose of s 28 is to protect an innocent purchaser who is deceived by the vendor's physical possession of the goods or documents of title and that the section operates when the buyer or seller without title is in actual possession of the goods or documents, it would be at odds with authority and commercial experience to attribute to the term "possession" in the definition of "delivery" the meaning of actual possession. It is a matter of daily occurrence that a seller performs his obligation to deliver the goods he sells by constructively giving delivery of possession to the buyer. One way in which goods are constructively delivered to a buyer is when the person having custody of them (whether as seller, bailee or otherwise) acknowledges that he holds the goods for the buyer: see Elmore v. Stone (1809) 1 Taunt 458 (127 ER 912); Official Assignee of Madras v. Mercantile Bank of India, Ld [1935] AC 53 , at pp 58-59; and cf. s 32(3) of the Act. That is what happened here. The dealer, in whose custody the motor vehicles remained at all material times, agreed to keep the motor vehicles as bailee for Natwest from the time when Natwest paid the dealer 90% of the agreed price: see cl.8 of the Agreement.
It was submitted that two authorities stand in the way of construing "delivery" in s 28(2) as including constructive delivery. Both arose under s 28(1) or its equivalent. The first was Nicholson v. Harper (1895) 2 Ch 415, where North J. said (at p 418):
"I read the Act to mean that there must be a delivery of the goods by the seller in possession, or, where there is no delivery of the goods, the transfer of documents of title - well-known mercantile documents, defined by the Act by reference."
With that view, I respectfully agree. But his Lordship seemingly went on to hold that continuity of actual custody - in that case actual custody of the goods by the second buyer - is inconsistent with delivery of possession, saying:
"In point of fact, the defendants have been in possession of the goods ever since the sale, and there has been no delivery or transfer to them of any kind since the sale."
In Bank of New South Wales v. Palmer (1970) 2 NSWR 532, the original seller retained actual custody of the goods. Helsham J. drew attention to the fact that s 28 does not speak of transfer of property in goods but transfer of goods, and said (at p 536):
"What does matter is that the section does not in terms refer to property in goods being the subject of any transfer, nor does it expressly refer to any transaction which is ordinarily accompanied only by a transfer of the property in goods rather than the goods themselves. That being so, I can see no reason for reading the words of the section in a way that would extend their operation beyond situations which are referred to, namely the delivery or transfer of goods or their documents of title."
I am respectfully unable to accept these views. They leave out of account the statutory context. Section 28 is not speaking of a delivery of goods in vacuo; it is speaking of a delivery of goods under a sale, and it is undoubted that delivery under a sale may be effected constructively. The dealer did therefore deliver the motor vehicles to Natwest under the sale, the dealer had possession of the motor vehicles with the consent of Gamer when the sale was made, Natwest was an innocent sub-buyer and on delivery it acquired the title it would then have had if the delivery had been effected under a sale which Gamer had authorized.
It follows that Natwest's title prevails and that the appeal should be dismissed.