Gamer's Motor Centre (Newcastle) Pty Ltd v. Natwest Wholesale Australia Pty Ltd

163 CLR 236
72 ALR 321

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(Judgment by: Mason CJ)

Between: Gamer's Motor Centre (Newcastle) Pty Ltd
And: Natwest Wholesale Australia Pty Ltd

Court:

Judges:
Mason CJBrennan J
Dawson J
Toohey J
Gaudron J

Subject References:
Sale of Goods

Hearing date: 3 March 1987
Judgment date: 24 July 1987

Sydney (heard in Canberra)

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Judgment by:
Mason CJ

This appeal raises the important question whether the reference in s 28(2) of the Sale of Goods Act 1923 (NSW) (the "Act") to "delivery" of the goods by the person who has bought or agreed to buy them under any sale, pledge or other disposition to a 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, is confined to actual delivery and excludes forms of constructive delivery.

The appellant, Gamer's Motor Centre (Newcastle) Pty. Ltd. ("Gamer"), is a motor vehicle wholesaler whose business is that of selling motor vehicles to retail dealers.  One such dealer was Evans & Rose Motors Pty. Limited (the "Dealer").  In July 1979 Gamer agreed to sell to the Dealer and the Dealer agreed to buy from Gamer the eight motor vehicles title to which is in issue in these proceedings. On or about 14 July 1979 the Dealer took delivery of seven of these vehicles, the representative of the Dealer then receiving and signing an invoice for the seven vehicles. The invoice set out a number of conditions and warranties one of which read: 

"Where payment is made other than in full settlement and in cash, all property rights in the vehicle remain in the vendor."

On 17 July the Dealer took delivery of the eighth vehicle and a further invoice in the same form for that vehicle was signed by the Dealer's representative. The Dealer did not pay any part of the purchase price for the vehicles.

The Dealer had earlier entered into a floor plan agreement called "Used Vehicle Bailment Agreement (Dealers Stock)" (the "Agreement") with the respondent ("Natwest"), formerly known as Lombank Finance Pty. Limited, for the purpose of financing the acquisition of stock.  This Agreement dated 17 November 1978 made provision for the purchase by Natwest of used motor vehicles acquired by the Dealer as stock on the footing that it would retain possession of such a vehicle as bailee for Natwest (cl.8) pending sale of the vehicle in the course of the Dealer's retail business or earlier termination of the bailment in accordance with the provisions of the Agreement.  Natwest agreed to pay 90 per cent of the agreed purchase price of a vehicle on completion of the sale to Natwest and the balance when the vehicle was disposed of by the Dealer (cl.2). The Dealer warranted that each vehicle sold to Natwest would be his own unencumbered property (cl.3) and that he would indemnify Natwest against any loss arising from defective title (cl.6).

Clause 9 of the Agreement was in these terms: 

"9.

  Subject to the limitations contained in Clause 5 I will seek to obtain but not as agent for Lombank offers to purchase the unit or offers addressed to Lombard to take the unit under hire purchase and I shall advise Lombank from time to time of receipt by me of any such offer.  Lombank may then in its entire discretion sell the unit to me but shall be under no obligation to do so and pending any such sale I shall have no interest in or option over the unit which shall remain at all times the property of Lombank and I shall have no right or authority to sell dispose of or part with possession or custody of the unit or create or authorise the creation of any lien thereon."

The Dealer completed and signed in respect of each of the eight vehicles a document headed "Lombank Finance Pty. Ltd. Delivery Receipt for Trade-In or Used Vehicles" and sent them to Natwest.  Although seven of the receipts are dated 13 July 1979, it is possible that they were not given to Natwest until 16 July 1979, as that is the date stamped on the documents indicating when the cheque was drawn by Natwest.  Each of the documents describes the relevant vehicle, states the purchase price, indicates that it was purchased from Gamer, and acknowledges that the Dealer takes delivery of the vehicle in the terms of the Agreement. Natwest drew two cheques in favour of the Dealer, amounting together to 90 per cent of the agreed purchase price of the eight vehicles.  The proceeds of the cheques were credited to the Dealer's bank account.  As Gamer had not received payment for the vehicles, it seized them later in the month of July 1979.

Natwest sued Gamer in the District Court in detinue and conversion, seeking the return of the vehicles and alternatively, their value, amounting to $26,100. Herron D.C.J. held that on the evidence Gamer authorized the Dealer to sell the vehicles and pass title to them before Gamer was paid and that this authorization constituted a variation of the printed condition on the invoice which I have quoted. These findings led to the conclusion that the Dealer passed title in the vehicles to Natwest and that the bailment between Natwest and the Dealer under the Agreement was effective.  Accordingly, his Honour did not need to decide whether s 28(2) of the Act applied.  His Honour gave judgment for Natwest in the sum of $26,100 with interest on that amount at the rate of 12.5 per cent per annum from 14 May 1981.  An appeal by Gamer to the New South Wales Court of Appeal (Priestley and McHugh JJ.A., with Kirby P. dissenting) was dismissed.  The Court held unanimously that there was no variation of the conditions on the invoice. The correctness of this conclusion is no longer in issue. Priestley and McHugh JJ.A., Kirby P. contra, went on to hold that the reference in s 28(2) of the Act to delivery included constructive delivery as well as physical delivery and that there was a constructive delivery by the Dealer to Natwest of the vehicles with the consequence that title passed to Natwest.

In its appeal to this Court Gamer contends that the reference in s 28(2) is confined to physical delivery and that, even if it extends to constructive delivery, no such delivery was established on the evidence.

Section 28(2) provides: 

"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 him 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."

The sub-section needs to be read with its companion provision, s 28(1). The two provisions are statutory exceptions to the general rule enunciated in s 26(1) that a sale of goods by a person who is not the owner and who sells without the authority or consent of the owner confers no better title than the seller has, unless the owner is by his conduct precluded from denying the seller's authority to sell.  Although there are differences between s 28(1) and (2), these differences are not material to the outcome of the present case.

Section 28(2) also needs to be read with s 5(1) of the Factors (Mercantile Agents) Act 1923 (NSW) which provides that a sale, pledge or other disposition of goods in the ordinary course of business of a mercantile agent, by a mercantile agent entrusted with the possession of goods is, subject to that Act, as valid as if he were expressly authorized by the owner to make the sale, pledge or other disposition.  The effect of s 28(2) is, if its requirements are satisfied, to validate the delivery or transfer and not the sale, pledge or other disposition:  see Cahn v. Pockett's Bristol Channel Steam Packet Company [1899] 1 QB 643 ;  City Fur Manufacturing Co. Ltd. v. Fureenbond, Ltd. [1937] 1 All ER 799 .

Although the last clause in s 28(2) makes no reference to a sale, pledge or other disposition by a mercantile agent in the ordinary course of his business, it has been considered in Australia and New Zealand that, if the conditions stated in the sub-section are satisfied, the delivery of the goods is to have the same effect as if the sale of the goods had been legally effected by a mercantile agent, that is, as if it had been in the ordinary course of his business:  Langmead v. Thyer Rubber Co. Limited (1947) SASR 29, at p 39; Jeffcott v. Andrew Motors Ltd. (1960) NZLR 721, at p 729.  It can scarcely be suggested that the sub-section was intended to provide that a buyer in possession could confer a good title only in cases where his disposition was in the ordinary course of his business as a mercantile agent: Dean, The Law Relating to Hire-Purchase Law in Australia, 2nd ed. (1938), pp.54-55; Else-Mitchell and Parsons, Hire-Purchase Law, 4th ed. (1968), pp.211-212. On the other hand in Newtons of Wembley Ltd. v. Williams [1965] 1 QB 560 , Pearson L.J. (at pp 577-580) and Sellers L.J. (at pp 574-575) considered that the effect of the section is to validate a transaction if the buyer does something which would amount to acting in the ordinary course of business if he were a mercantile agent.  Although it is unnecessary to make a choice between these competing opinions for the purpose of deciding the present case, there is some force in the view that the last clause of s 28(2) speaks to a situation in which the assumption is made that a mercantile agent entrusted by the owner with the goods or documents of title sells, pledges or otherwise disposes of them in the ordinary course of his business.  See the discussion in Atiyah, The Sale of Goods, 7th ed. (1985), at pp.301-302.

The word "delivery" is defined in s 5(1) of the Act to mean, unless the context or subject-matter otherwise requires, "voluntary transfer of possession from one person to another".  This is the legal meaning of "delivery" and it differs from the popular meaning of the word which, as Professor Atiyah points out (at p 71) is the dispatch of goods.  The word "possession" is not defined by the Act, though s 6(3) of the Factors (Mercantile Agents) Act provides that, for the purposes of that Act:

"... an agent shall be deemed to be possessed of goods or documents of title to goods whether the same are in his actual custody or control or are held by any other person subject to his control or for him or on his behalf."

Gamer submits that the word "possession" should be given its common or ordinary meaning.  This, according to the argument, is actual physical custody. The argument, if accepted, entails the consequence that delivery must be actual. Whether the popular understanding of "possession" confines it to actual custody is open to doubt.  But this question may be put to one side as "possession" is an established legal concept, particularly in its application to goods and chattels.

It is a well-settled rule of construction that in the case of a statute being a code intended to replace the common law, its meaning is to be ascertained in the first instance from its language and the natural meaning of that language is not to be qualified by considerations derived from the antecedent law:  Brennan v. The King (1936) 55 CLR 253 , at p 263;  Bank of England v. Vagliano Brothers [1891] AC 107 , at pp 144-145.  But an appeal to earlier decisions can be justified if the language of the statute is itself doubtful or if some other special ground is made out, for example, if words used have previously acquired a special meaning which differs from their ordinary meaning: Sungravure Pty. Ltd. v. Middle East Airlines Airliban S.A.L (1975) 134 CLR 1 , at p 22.

Here, as I have said, the word "delivery" is defined in terms of its legal meaning.  There is therefore a strong foundation for the conclusion that the statutory definition of "delivery" referred to "possession", not in its popular sense or as meaning actual custody, but in its legal or technical sense. Indeed, the seller's obligation under s 30 of the Act cannot always be sensibly discharged by actual delivery.  A commodity or chattel incapable of actual physical delivery, except perhaps at great inconvenience and cost, such as a yacht (see Bank of New South Wales v. Palmer (1970) 2 NSWR 532), must be capable of constructive or symbolic delivery falling short of actual delivery. And there is no suggestion in s 30 that "deliver" is used otherwise than in its defined sense.  Section 32(3) of the Act expressly recognizes constructive delivery by attornment.  The sub-section provides: 

"Where the goods at the time of sale are in the possession of a third person, there is no delivery by seller to buyer unless and until the third person acknowledges to the buyer that he holds the goods on his behalf ..."

The sub-section is not expressed in such a way as to indicate that it was intended to make provision for delivery otherwise than in the defined sense of the term.  The point of s 32(3) was to negate the existence of a delivery unless in the situation described there was an acknowledgment by the third person to the buyer.

It is significant that Sir Mackenzie Chalmers, in his Commentary on the original Sale of Goods Bill of 1888 treated the reference in the statutory definition to "possession" as a reflection of the antecedent common law. He drew attention to those features of the Bill which were departures from the common law and did not suggest that the statutory definition of "delivery" constituted such a departure.

In his Sale of Goods Act, 1893, 5th ed. (1902) which was substantially a reproduction of his Commentary, he said (at p 118) of the statutory definition of "delivery", which was the same as that contained in s 5 of the New South Wales Act: 

"Delivery may be actual or constructive. Delivery is con structive when it is effected without any change in the actual possession of the thing delivered, as in the case of delivery by attornment or symbolic delivery.  Delivery by attornment may take place in three classes of cases.  First, the seller may be in possession of the goods, but after sale he may attorn to the buyer, and continue to hold the goods as his bailee.  Secondly, the goods may be in the possession of the buyer before sale, but after sale he may hold them on his own account.  Thirdly, the goods may be in the possession of a third person, as bailee for the seller.  After sale such third person may attorn to the buyer and continue to hold them as his bailee."

The third class of case is now dealt with in s 32(3).

Sir Mackenzie Chalmers also drew attention to Sir Frederick Pollock's definition of "delivery" as "voluntary dispossession in favour of another" and later went on to refer to that author's discussion of "symbolic delivery" by giving the buyer the key of the place where the goods are stored, accepting the view that the key is not the symbol of the goods, but that the transaction "consists in such a transfer of control in fact as the nature of the case admits, and as will practically suffice for causing the new possessor to be recognized as such":  Pollock and Wright, Possession in the Common Law, (1888), at p 61.  See Dublin City Distillery, Limited v. Doherty [1914] AC 823 , at pp 843, et seq., 852;  Wrightson v. McArthur and Hutchisons [1921] 2 KB 807 , at pp 816-817.

The importance of these comments is that, though  made with reference to the concept of "delivery" as defined by the statute, they nonetheless reflected the tenor of the antecedent judicial decisions on the common law, the statute being a codification of the common law.  Each of the three examples of constructive delivery by attornment given in the passage which I have quoted was an illustration taken from the earlier common law.  Lindley L.J. expressed the general principle in Mills v. Charlesworth (1890) 25 QBD 421 in this way (at p 425): 

"In point of law possession of goods may be changed by agreement without any physical change in their position or in the position of the person who actually guards them.  The right to possession may be transferred by agreement, and the character in which the custodian holds them may be changed by attornment."

This principle was the foundation of the decisions on s 17 of the Statute of Frauds 1677 (now s 9 of the Sale of Goods Act) whereby a contract for the sale of goods of ten pounds or more was not enforceable "unless the buyer shall accept part of the goods so sold and actually receive the same".  The courts equated actual receipt with delivery, holding that there may be a change of possession without any change of actual custody, such a change of possession being described as constructive delivery:  Pollock and Wright, at p 57.  So, in Elmore v. Stone (1809) 1 Taunt 458;  127 ER 912, Mansfield C.J. held that two horses sold by the seller to the buyer came into the possession of the buyer for the purpose of s 17 of the Statute of Frauds on the seller acknowledging that he held them for the buyer as livery stable keeper and not as seller.  The decision was applied in Marvin v. Wallis (1856) 6 El & Bl 726; 119 ER 1035; and accepted by Lord Atkinson in Dublin City Distillery (at p 844) as having been correctly decided, notwithstanding the suggestion that it was overruled in Proctor v. Jones (1826) 2 Car & P 532;  172 ER 241.

Lord Parker in Dublin City Distillery, speaking of pledges, said (at p 852): 

"There are ... cases in which possession may pass to the pledgee without actual delivery, for example, whenever there is some agreement between the parties the effect of which is to change the possession of the pledger from a possession on his own account as owner into a possession as bailee for the pledgee:  see Meyerstein v. Barber (1866) LR 2 CP 38."

And his Lordship went on to say (at p 852) that where the goods were in the possession of a third party the pledger usually gave a direction to the third party requiring him to deliver or to hold the goods for the pledgee, followed either by actual delivery to the pledgee or by an acknowledgment by the third party that he holds for the pledgee.  See also Official Assignee of Madras v. Mercantile Bank of India, Ltd. [1935] AC 53 , at pp 58-59.

Gamer contests the relevance of the decisions on s 17 of the Statute of Frauds on the ground that the courts were there concerned with the interpretation of the words "actually receive the goods" and not with the words "delivery" or "possession".  The response to this argument is that a central element in the reasoning in the decisions was the concept of delivery and change of possession expressed in the broad principle stated by Lindley L.J. in Mills v. Charlesworth.

This principle was accepted by this Court in Minister for Supply and Development v. Servicemen's Co-operative Joinery Manufacturers Ltd. (1951) 82 CLR 621 , a decision on the Sale of Goods Act 1895 (SA), which was not referred to in argument in this Court or in the courts below. Williams J. observed (at p 641): 

"It is well established that constructive delivery sufficient to pass the title in chattels may be effected by a change in the character of an uninterrupted custody."

For this proposition his Honour cited Elmore v. Stone, Marvin v. Wallis, Dublin City Distillery and Akron Tyre Co. Pty. Ltd. v. Kittson (1951) 82 CLR 477 .  Webb J. (at p 643) agreed with Williams J. on this point, but considered (at p 644) that the evidence did not establish a case of constructive delivery.  Latham C.J. also thought that there could be constructive delivery under the Act.  His Honour said (at p 635): 

"The fact that the buyer was in possession as a bailee has no significance in relation to delivery under the subsequent contract of sale.  There could be a delivery under that contract only if there was a change in the character of the possession - i.e., from possession as bailee to possession in pursuance of the contract of sale:  Pollock and Wright, Possession in the Common Law (1888), pp.57, 74, 75."

In Akron Tyre Co. Pty. Ltd. v. Kittson, the joint judgment of Williams and Kitto JJ. states (at p 494) the proposition which I have quoted from the judgment of Williams J. in Minister for Supply and Development.  These statements in this Court, like those in Dublin City Distillery, indicate that the Sale of Goods Act contemplates constructive delivery just as the common law did.

However, Gamer submits that in the context of s 28(2) "delivery" bears a more confined meaning.  This is because one aspect of the doctrine of constructive possession includes the notion of a change in the right to possession and because the assumption which the sub-section predicates is that the buyer in possession of the goods or documents of title, having no property in the goods, cannot pass title to them, except through the operation of the sub-section.  It is said that this demands that the reference to "delivery" be read as a reference to actual delivery.  I would reject this argument on the ground that s 28(2) makes provision for the buyer in possession to pass property in the goods as if the person making the delivery were a mercantile agent entrusted by the owner with the goods or the documents of title.  This it does by validating the delivery, not with standing the absence of title in buyer in possession. In other words, the effect of the sub-section is to give validity to a delivery which would, but for absence of title in the person making it, be an effective delivery.

Gamer also relies on the interpretation given by the Judicial Committee in Pacific Motor Auctions Pty. Ltd. v. Motor Credits (Hire Finance) Ltd. (1965) 112 CLR 192 ; [1965] AC 867 , to "possession" in s 28(1) of the Act.  In a passage quoted with approval by Barwick C.J. in Mercantile Credits Ltd. v. F.C. Upton & Sons Pty. Ltd. (1974) 48 ALJR 301, at p 302, Lord Pearce speaking for the Judicial Committee said (at p 204;  p 888 of AC): 

"The heredity of the section which their Lordships are now considering can therefore be summed up as follows.  Its words are identical with those of section 8 of the Factors Act, 1889, where they first appeared in this exact form.  In that Act it was expressly deemed that 'actual custody' should constitute possession.  In the Sale of Goods Act, 1893, section 25, the same form of words was again enacted.  Part of that section (namely, 25(2)) contains an implicit reference and part of it (namely, 25(3)) an explicit reference to the Factors Acts.  There was strong authority for saying that in part of the section (namely, 25(2)) 'actual custody' constitutes possession.  It had never been suggested by 1923, when the same form of words was first enacted in New South Wales, that there could be written into another part of section 25 (namely, 25(1)) an implied proviso that actual custody should not constitute possession if the possession though continuous became attributable to a bailment - thus giving to possession a meaning different from that which it had under the rest of the section and different from that which it had under a previous and co-existing section in identical terms (Factors Act, 1889, section 8)."

Earlier his Lordship had observed (at p 202;  p 886 of A.C.): 

"The object of the section 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."

The "strong authority" for saying that the reference in s 28(2) to "possession" is to actual custody is found in Hugill v. Masker (1889) 22 QBD 364 , at p 370, per Lord Esher M.R., and more particularly in Cahn, at p 658, per Collins L.J.  And it must be accepted, in accordance with what was said in Pacific Motor Auctions that "possession" has the same meaning in s 28(1) and (2).  But this does not mean that the meaning which the word has in the context in which it appears at the commencement of the two sub-sections is the meaning which it bears when it appears in the statutory definition of "delivery".  The point is that the object of s 28, the protection of innocent third parties dealing with a seller or buyer in possession of goods or the documents of title thereto and therefore appearing to be the owner of the goods, as well as the legislative history of the provisions, requires that "possession" be construed in a particular way.  These considerations have no application at all to the statutory definition of "delivery" which is designed to identify or describe the act which passes title to goods as between seller and buyer.

Indeed, to treat "delivery" as embracing constructive delivery is to enhance the protection given by s 28(2) to the innocent purchaser.  There is no valid reason why his title should depend upon actual, as distinct from constructive, delivery.  The mischief aimed at is a sale by a buyer in possession of goods or documents of title who is not the owner of them, the object being to protect the sub-buyer who is deceived by the appearance of ownership arising from possession.  There is no point in confining the protection to the sub-buyer who takes under an actual delivery.  Once this is appreciated, the history of s 28(1) and (2), which can be traced through the Factors Acts, beginning with the English Act of 1823, ceases to have any importance.  That history shows that the protection afforded to the innocent buyer was gradually extended, but it throws no light on the question now under consideration.

Gamer then relies on authority not binding on this Court.  Nicholson v. Harper (1895) 2 Ch 415, as McHugh J.A. pointed out, does not decide that s 28 contemplates actual delivery.  It decides no more than that there must be a delivery or transfer in addition to the sale (p 418).  In Bank of New South Wales v. Palmer, Helsham J. concluded (at p 536) that "delivery" in s 28 is restricted to a "change in physical possession of goods or title deeds", his view being applied by O'Regan J. in N.Z. Securities & Finance Ltd. v. Wrightcars Ltd. (1976) 1 NZLR 77.  I do not consider that his Honour's conclusion is supported by the reason assigned for it, namely that the section neither refers to property in goods the subject of the transfer, nor to any transaction which is ordinarily accompanied only by a transfer of property in goods rather than the goods themselves.  This reason supports no more than the limited conclusion reached in Nicholson v. Harper that there must be a delivery apart from the sale, pledge or other disposition. So long as this requirement is satisfied, a constructive delivery is a delivery within the statutory definition and within the meaning of s 28(2).  Thus, each of the three classes of constructive delivery by attornment instanced by Sir Mackenzie Chalmers would satisfy the statutory definition.

But cases of constructive delivery are not confined to these three examples, as the statements dealing with a change in the character of possession, previously quoted, so clearly indicate.  The question then is whether on the evidence there was a change in the character of the Dealer's possession of the vehicles which amounts to a constructive delivery to Natwest. The majority in the Court of Appeal held that the effect of the Agreement between Natwest and the Dealer was that, on payment of 90 per cent of the purchase price, the Dealer became the bailee of Natwest. This, in the opinion of their Honours, constituted a transfer of possession and was a delivery for the purpose of s 28(2).

Despite the discrepancy in the dates of the Gamer invoices, the delivery receipts and the dates on which Natwest drew cheques in favour of the Dealer, it seems that the Dealer, having agreed to buy and having taken possession of the vehicles from Gamer, then delivered the receipts to Natwest against which cheques were subsequently drawn in favour of the Dealer.  That was the effect of the oral evidence given by the officers of Natwest and the Dealer. The delivery receipt had a dual operation.  When read with the Agreement, it evidenced the terms of the agreement for sale to Natwest, that agreement being made on delivery of the receipt, and acknowledged that the Dealer held the vehicle for and on behalf of Natwest.  And the receipt also operated as an acknowledgment that the Dealer held the vehicle as bailee for Natwest pursuant to the Agreement.  It may be that in this respect the operation of the receipt was conditional, not only upon Natwest's agreement to purchase the vehicles, but also upon Natwest's payment of 90 per cent of the agreed price.

However this may be, I see no difficulty in regarding the handing over of the delivery receipt as serving the dual purpose already mentioned, namely an acknowledgment that the Dealer holds the vehicle to which it relates for Natwest pursuant to the agreement for sale contemporaneously made and as an acknowledgment that it holds, or will hold, as bailee pursuant to the Agreement. The receipt, though it evidences the terms of sale, is not itself the sale or the agreement for sale.  The delivery of the receipt is something apart from the sale so that the constructive delivery which it evidences is something more than a mere change in the right to possession arising from the sale from the Dealer to Natwest.

I would dismiss the appeal.