Title to goods

Ceres Orchard Partnership v Fiatagri Australia Ltd

"when acting in the ordinary course of business of a mercantile agent" means part of the ordinary, uninterrupted flow of the business. It will include a special transaction, provided that it is part of the common flow of the business. The fact that a transaction might be exceptional or unprecedented as far as the seller is concerned will not preclude it from being in the ordinary course of business.

NZ Securities Ltd v Wrightcars Ltd

-> A statement or representation made to a third party by the owner of goods to the effect that another has the right to deal with the goods may form the basis of an estoppel Wcars agreed to sell cars to X for $1300. Although X was given possession, property was not to pass until the price had been paid. X gave Wcars a cheque but asked them not to present it until he had made arrangements with a finance company to finance the purchase. The finance company intended to send its cheque directly to Wcars but X asked for the cheque to be sent to him, saying he had already given Wcars a cheque. The finance company called Wcars to confirm that X owned the car and that they had been paid. Acting on this, the finance company sent the cheque to X. Xs cheque was later dishonoured and he fell into arrears with payments to the finance company. Wcars repossessed the car and sold it. The finance company then claimed that Wcars was liable to it for converting the car. It was held that W was precluded from relying on the s by its conduct because they had made it look like X was authorised to sell the car. The precise purpose of the finance company making the phone call was to find out if Wcars had already been paid. In doing so they had 'clothed X with the cloak of authority' which deceived NZS, albeit unintentionally. The finance company was thus entitled to succeed in its action. W, then, bore the loss under s23(1).

Astley Industrial Trust v Miller

-> Mercantile agent must have the goods as a mercantile agent; not in some other capacity A car was sold by a company that had a fleet of cars. The company primarily rented the cars out but occasionally sold them on. Owner of car gave car to the company in its capacity as a hire company NOT as a dealer in cars. The company then sold the car on even though it had no title to it. The mercantile agent argument was argued. It was held that when the company sold the car, it did not pass good title to a third party as it was not in possession in its capacity as a MA but as a hire company The Ct gave e.g.s of where this would operate: - Lending a car to a next door neighbour who went off and sold it - if you neighbour happened to be a motor dealer, you would not be bound by the sale as you had not given it to him as a dealer - Let your house out whilst on holiday and the lessee is an auctioner who sells it - again, not in the right capacity and not binding sale.

Paris v Goodwin

-> There must be consent to possession but if the mercantile agent gets possession of the goods by a trick or deception, it does not negate consent, provided the owner voluntarily handed the goods over Giving of cars to dealer to test the market with no consent to sell. Dealer acted fraudulently in obtaining the registration documents by saying the car needed minor repairs. Held that despite the dishonesty, there was still consent. The title accordingly went to the 3rd party because the material was voluntarily handed over and that was determinative.

The seller's right to sell

14(a) is concerned with the seller's ability to pass title. There is an implied condition that the seller has a right to sell. Because this is a condition, the buyer has the right to rescind the contract if this is not the case. The expression "right to sell" is not defined but it is clear that it does not require that the seller of the goods actually be the owner of them, only that the seller has the power to sell at the appropriate time.

Treat the contract as repudiated and/or claim damages

A buyer is entitled to repudiate the whole contract and claim damages. However, as is the case when any condition is breached, it is possible under s 13(1) SGA to elect to treat the breach of condition as a breach of warranty, and not as a ground for treating the contract as repudiated. In such a case, the appropriate remedy is damages.

Ingram v Little

A group of ladies sold a car to someone claiming to be Mr Hutchinson who claimed he had a good reputation. He then sold it on to an innocent buyer. The cheque to the ladies later bounced.

Mercantile agent

A mercantile agent is described in s 2(1) Mercantile Law Act 1908 as an agent having 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. This has been interpreted fairly broadly, ad it is general held that a MA is a person who is in a substantial way of business accustomed to dealing in the goods of others and appears to have the authority of the owner

Lewis v Averay

A seller of a car was misled into thinking the buyer was a film actor. The seller accepted a cheque which was later dishonoured. The car was then resold by the rogue to an innocent buyer. It was held that, although the first sale could have been avoided on the ground of fraud, it was nevertheless a valid sale which had not been avoided at the time of the second sale. The seller had intended to sell the car to the anybody, and had simply made a mistake as to the buyer's credit-worthiness. At the time of the second transaction, the rogue has a valid title to pass on. Accordingly, the innocent third party obtained a good title. o The court did not accept the void/voidable distinction from Ingram v Little.

Sale by mercantile agent

Although the owner's simply giving possession of goods to another does not normally give rise, without more, to an estoppel as against the owner if that other disposes of the goods to a bona fide third party, an exception exists where the person to whom possession has been given by the owner is a mercantile agent. The giving of possession of goods to a mercantile agent creates the appearance that the agent has a right to sell the goods because a mercantile agent is someone who deals in other people's goods. As such the true owner will lose his or her title to the goods if the mercantile agent sells them to an innocent third party: s 3(1) Mercantile Law Act 1908. This is so even where the true owner has not authorised any sale, or has expressly forbidden it, for it is the appearance, not the reality, of authority to sell which is created by the placing of the goods in the possession of the mercantile agent which founds estoppel; and this appearance has been brought about by the act of the owner of the goods. Requirements: - Disposition must be made by a mercantile agent - mercantile agent must be in possession of the goods with the consent of the owner - The disposition must be in ordinary course of business of the agent - The third party must take in good faith and without notice of the lack of authority

Sigglekow v Gibbs

An interesting question which has arisen is the effect of s27(1) when the seller in possession sells goods to a third party in such circumstances that the sale amounts to theft of the goods from the first buyer by the seller. S26 provides that where goods have been stolen and the offender is prosecuted to conviction, the property in the stolen goods re-vests in the person who was the owner of them, notwithstanding any intermediate dealing with them. Seller sold car to buyer who left it with seller for 11 months. Seller sold it to buyer 2 dishonestly (ie knowing he was only a bailee and had no right to do so). Buyer 1 went to the police and the seller was convicted of theft by conversion. These facts fell both within s26(1) and s27(1) The effect of S27(1) meant that buyer 2 would get the title because buyer 1 left the car with the seller continuously. However, s 26(1) says that where goods have been stolen and the offender is convicted, property re-vests in the person who was the owner notwithstanding any other intermediate dealing e.g. sale. A literal meaning of this would mean the title would re-vest in buyer 1. It appears from this interpretation that the purpose of s26(1) was to state the exception to the exception. However the Court did not allow this. Taking into consideration the fact that the object of s27(1) is to protect innocent buyers who have been deceived, the court held that s27(1) prevails over s26(1). Infact, that all statutory exceptions should prevail over s26(1). In light of this decision, and the fact that the market overt rule has been abolished, s26(1) is now unlikely to be of any use. No buyer who takes goods from a thief can obtain a good title and consequently no statutory provision reinvesting title in the woner is necessary as the owner never loses title in the first place. The Law Commission has recommended that this be removed from the statute books, but this is yet to happen.

Worcester Works Finance Ltd v Cooden Engineering Co Ltd

Any pledge or disposition that will bind the seller (i.e. not just a sale) In this case, dispositions were considered. The court held that dispositions was wide in its meaning, but had to involve more than a mere transfer of possession to the second buyer. The transaction had to be of a kind that created a property right in the 2nd buyer

Title to goods

S 14 of the SGA sets out three undertakings with regard to title that must are implied by the seller in a contract of sale, unless the circumstances show differently. These are: the right to sell, quiet possession and freedom from charge or encumbrance.

Seller in possession

S27(1) applies where a person has sold goods to a buyer and property passes but the buyer leaves the goods in the possession of the seller. If the seller then goes on to resell the property to an innocent third party, s 27(1) SGA will provide protection to the second purchaser. The reason behind this is that through the eyes of a third party, the owner, by leaving goods in the possession of the seller, has changed nothing, even though title has been affected. In consequence, it is the owner of the goods, who has left them in the possession of the seller and created such an appearance that the person in possession of the goods has the right to sell them, who must bear the loss as between him or her and an innocent buyer from the seller in possession. For s 27(1) to apply the seller must have continuous physical possession of the goods (Pacific Motor Auctions v Motor Credits Ltd) or, if goods are not in the seller's possession at the time of the sale, afterwards came into his or her possession. S 27(1) does not apply where there is a break in the continuity of physical possession (Mitchell v Jones).

Mitchell v Jones

Sale of horse to buyer and property and possession transferred to the buyer. A few days later the buyer leased the horse back to the seller, who then sold it to Buyer 2, a bona fide buyer with no knowledge of the previous transactions. Buyer 2 argued that the seller was a seller in possession and as such he should have a good title. Ct rejected this, saying there was a break in the continuity of physical possession by the seller after he sold the horse to the appelent, the seller having made delivery of the horse to the appellant. Had the buyer not taken possession at all and just left it with the seller then set up the lease, s27(1) would apply.

Jethcott v Andrew Motors

Seller advertised car for sale; buyer 1, a dishonest person, paid for it with a known bad cheque. Buyer 1 sold to buyer 2, an innocent third party. Ct held that seller bore the loss and buyer 2 got good title because the seller still voluntarily handed over possession (even though duped into doing so)

Elwin v O'Regan and Maxwell and National Employers' Mutual General Insurance Assoc Ltd v Jones

Both of these cases have broadly the same facts. HP company gave to A an option to purchase a car. A got possession of the car, who sold it down a chain of buyers to E, a bona fide purchaser. A stopped paying. The Company wanted the car back upon discovering it was in E's possession. Note in National Employers, the car was stolen at first. The court held that the starting point is nemo dat rule. Here, there are no statutory exceptions and the thief cannot give good title. The chain of buyers makes no difference. E tried to apply s27(2), saying that the sale to them by D has the same effect as if D was a mercantile agent of C etc. The Court refused to apply this to a chain in this way - the apparent consent of the original owner is required.

Blake v Melrose

Breach of the implied warranty that the goods are free from any charge. As this is a warranty and not a condition, the appropriate remedy for the breach is damages and rescission is not available. However, the damages recoverable are not limited to the purchase price and can include other loses suffered. The buyer (who was a car dealer) was thus also entitled to the lost profit that he would have got on the car he had bought as it was foreseeable that the dealer would have made a profit.

Rowland v Divall

Buyer bought a car and used it for a long period of time (4months) before the owner tuned up and demanded it back. The buyer then demanded the purchase price back from the honest seller (who had also been conned). Buyer entitled to money back from seller but the seller said that the buyer had had the use of the car for 4 months so he wanted a reduction in the amount he had to pay as there was not a total failure of consideration. However, the court said that buyer had wanted property in the car which he had not been given, not simply possession. A sale by definition is the passing of property. The consideration of the sale had thus totally failed and the buyer was entitled to the full amount.

Mason v Burningham

Buyer bought a typewriter from a seller which turned out to be stolen. It was a second hand type writer which needed repairs. The buyer had spent money on the repairs. Following this the true owner turned up and took it back. Buyer was entitled to not only the purchase price but the money paid to fix it up as they were foreseeable repair costs

Niblett v Confectioner's Materials Co Ltd

Seller agreed to sell a quantity of tins of condensed milk to be sent from NY to London. When the tins arrived, they were found to bear the name "Nissly", and the Nestle company claimed this breached their trademark and sought an injunction to stop the seller selling the goods. In order to obtain possession of the goods from customs, the buyer was obliged to remove the label, and the goods could be sold only at a loss with no marking on them. Seller was held to be breaching s14(a) because the court held that if a third party can intervene and stop a sale (which Nestle could), there is no right to sell This also breached s14(b) which gives a warranty that the buyer shall have and enjoy quiet possession, which could not happen if Nestle trying to get an injunction

Louis Dreyfus Trading Ltd v Reliance Trading Ltd

Seller sold sugar to a buyer. Seller already had an exclusivity agreement with a third party to only sell him the goods. The third party got an injunction to restrain the sale. This was held to be a breach of s14(b) - eg another person's interest will breach quiet enjoyment

Pacific Motor Auctions Pty Ltd v Motor Credits

Dealer had cars for sale and sold them on HP to finance company but kept possession. The finance company then revoked authority to sell the cars. In spite of this, the dealer sold the cars to Buyer 2. The finance co wanted the cars back. Argument was that the dealer was only a bailee of the cars and could not give a good title as it had formerly been held that, for the seller in possession exception to the nemo dat rule to operate, the seller had to be in possession of the goods as seller and not in some other capacity as bailee. The Court rejected this argument on the grounds that, although there was a bailment, it is all about appearances and, where there is continuous possession, it looks like the dealer is still the owner.

Sale under a voidable title

If a sale is made that is voidable, the title initially passes to the buyer but if the original owner of the goods decides to void the transaction the title will return to the original owner. Issues often arise in regards to rogue cases. Rogue cases occur when a trickster obtains goods by cheque from their owner under a fraudulent arrangement (usually impersonation), and then sells the goods to an innocent third party. The cheque to the original owner then bounces and the rouge disappears. Typically, there is no right of redress against the rogue and the contest is between the original owner seeking return of goods which have not been paid for, and the innocent third party, who has paid for the goods being claimed by the original owner. Here, the rogue's title is voidable for fraud but if the rogue sells the goods on before the original owner has acted to avoid the transaction, the rogue has a valid title pass on and the new owner gets a good title: s25, Lewis v Averay

Rescind the contract and recover the price on the ground that there has been a total failure of consideration

If the buyer chooses to rescind the contract on the ground of the breach of condition, S55 allows buyers to get the total purchase price back because there has been a total failure of consideration.

Moorgate Mercantile Co Ltd v Twitchings

In the 1970's England had a HP registrar. The registrar was established pursuant to a scheme which, although voluntary, was used by 95% of all car dealers and finance companies, including X and Y. X, a car dealer, sold a car to A on HP but due to an oversight failed to register it. A then fraudulently sold it to another dealer Y. Before buying the car Y rang the register to see if it was unencumbered. He was told it was. Later, X tried to claim the car back. It was argued that X's omission to register the car on the registrar was so negligent that it could estop his right to assert his title to the car. He owed a duty of car to other dealers to make sure the car was registered. Majority found there was no negligence as there is no obligation to safeguard your own property. Dealers were not obliged to use the registrar. Y simply took a business risk. Using the register could reduce the risk but it did not guarantee anything. There was no representation by X that it had no interest and thus is could get the car back and Y bore the loss Lord Wilberforce at 903 "He is not estopped from asserting his title by mere inaction or silence, because inaction or silence, by contrast with positive conduct or statement, is colourless: it cannot influence a person to act to his detriment unless is acquires a positive content such that that person is entitled to rely on it. In order that silence or inaction may acquire a positive content It is usually said that there must be a duty to speak or to act in a particular way, owed to the person prejudiced, or to the public or to a class of the public of which he in the event turns out to be one," Strong dissenting judgement that dealers did owe a duty of care.

Mercantile Credit Co Ltd v Hamblin

In this case the defendant wanted to borrow money on the security of her car. She went to a dealer that she knew and trusted and asked how to do it. He gave her forms which she filled out without understanding them, believing them to be mortgage documents. In fact, the forms agreed to sell the car to the plaintiff finance company and then lease it off them on HP. Later the finance company claimed the car. The HP company argued that the women had been negligent in filling out the forms not bothering to read them. She had thus caused the loss. CA held that the plaintiff was not bound by the HP agreement. Although in the circumstances she owed a duty of care, there had been no breach as it was not unreasonable for her to trust the dealer. Furthermore there was no causation because it was not her actions that had caused the loss to the finance company; rather the loss was caused by the dealer's fraud.

Mercantile Bank of India Ltd v Central Bank of India Ltd

In this case, merchants pledged some railway receipts with the Central Bank of India in return for a cash advance, the receipts being documents which enabled their holder to obtain delivery of goods which had been dispatched by rail. In accordance with its usual practice, the bank returned the receipts to the merchants to enable them to get clearance of the goods. The merchants fraudulently pledged them to the Mercantile Bank of India. The merchants were subsequently declared insolvent and an action was brought by the Central Bank for conversion. The Mercantile Bank argued that the Central Bank was estopped by its conduct from denying that the merchants had the right to pledge the goods. The PC held that this was not so. A railway receipt was simply an authority to take delivery of the goods and possession of such a document did not amount to any representation that the holder had implied authority or right to dispose of the goods. The possession of the receipts no more amounted to a representation than did actual possession of the goods themselves; and giving possession of goods to antoher does not, without more, imply a right in that other to dispose of the goods.

Sales without title

Issues concerning sales without title tend to arise when an innocent buyer has purchased goods from a vendor without title and the true owner wants the goods back. The general rule is expressed in the maxim 'nemo dat quod non habet' which means that no-one can transfer a better title to goods than he himself possesses. Here the law is faced with a conflict between the interests of two parties, that of the true owner and that of the buyer with no notice of the defect in the purported seller's title. Denning LJ commented in Bishopsgate Motor Finance Corp Ltd v Transport Brakes Ltd "In the development of our law, two principles have striven for mastery. The first is for the protection of property: no-one can give a better title than he himself possesses. The second is for the protection of commercial transactions: the person who takes in good faith and for value without notice should get a good title. The first principle has held sway for a long time, but it has been modified by the common law itself and by statute, so as to meet the needs of our own times". The nemo dat rule is set out in s 23(1) SGA (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...'. Thus a purported sale by a person who has no title to the goods will not, in general, be effective to create a title in the buyer. This rule is, however, subject to a number of exceptions. The underlying thread of any exception is that the owner has, by their conduct, created the appearance to the eyes of a third party that the person selling DOES have the right to sell.

Car and Universal Finance Co Ltd v Caldwell

Notice to the R does avoid the contract, but if this is not possible, it is sufficient to contact the police or the AA etc - whatever is reasonable in the circumstances.

Paris v Goodwin

Owner gave his car to a dealer, not giving him authority to sell but telling him to look out for respective buyers. Dealer said it needed repairs so owner left it there. He told the owner that someone wanted to look at the registration etc so he gave it to him. Dealer then sold the car. Buyer said that owner was precluded from claiming the car back because he had handed over the registration. Court said there was no estoppel. Here, simply giving a car to dealer to test the market with an instruction not to sell is NOT negligent.

Shogun Finance Ltd v Hudson

Reviews all the law in this area. In this case, a rogue acquired Mr Patel's drivers licence. Using this identification he obtained a car on credit from a finance company who checked his name and address in electoral register as well as his credit rating. He then sold the car to an innocent third party. Before selling the rogue the car they checked Ps name, credit rating, signature etc. They went to considerable lengths to ensure they were selling it to the right person. By a majority, the court held that the only person that could accept the contract was the creditworthy P (following Little type reasoning). Identity was held to be fundamental in a transaction involving consumer credit because the necessary checking of an applicant borrower, which took place before the contract was made, depended on correct identification of the borrower. Thus the contract was void from the beginning and the finance company retained title to the vehicle.

Void ab inito cases

Sometimes, the courts get around the general rule by saying the contract was void ab initio (e.g. Ingram v Little). The courts will only adopt this approach if the seller regards the identity of the purchaser as of the utmost importance (Shogun Finance Ltd v Hudson). The offer of sale will thus be directed only to the particular person and it is taken as intended that no one except said person can accept the offer. Thus the fraudulent buyer cannot acquire any title to the goods and consequently, neither can the innocent party to whom the goods are resold The distinction made in these cases between a contract which is void ab initio on the ground of mistake of identity and one which is voidable for fraud is a fine one. No legislation has been enacted internationally or domestically to resolve the issue. It has been suggested that in NZ the Contractual Mistakes Act 1977 would apply. If a fraudulent purchaser is regarded as a party to a mistaken contract under the Act, an innocent third party might well receive protection under this provision. The question of the applicability of the Act has yet to come before the courts.

Estoppel

The concluding words of s 23(1) - say "...unless the owner of the goods is by his conduct precluded from denying the seller's authority to sell". This qualification means that if the owner of the goods has acted in such a way as to give another person the impression that they had the authority to pass the title, they may be estopped from claiming the transaction is invalid. The owners conduct must be such that he has held out to an innocent seller that he has the right to sell the item and the buyer must have relied on this representation (Mercantile Bank of India Ltd v Central Bank of India Ltd)

Estoppel in General

The general principle of estoppel is that you do not have to take care of your own goods. It might be careless or imprudent but cannot be elevated to the tort of negligence (Moorgate Mercantile Co Ltd v Twitchings) As such, merely giving possession of your property to someone else (Mercantile Bank of India Ltd v Central Bank of India Ltd) or carelessly leave your goods around (Farquharson Bros v C King & Co Ltd) does not give rise to conduct sufficient to raise estoppel. Courts are generally reluctant to find estoppel by negligence (that is, negligence in looking after own goods); the fact that someone might be unbusinesslike or careless with their own goods is not enough. For estoppel by negligence it must be shown that there has been a breach of a duty of care, and that the breach caused the loss of the party pleading the estoppel: Mercantile Credit Co Ltd v Hamblin

Microbeads AG v Vinhurst Road Markings Ltd

The words "shall have and enjoy quiet possession" indicate that the provision looks to the future and is not limited to the time at which the property is to pass. Seller sold roadmarking equipment to the buyer. At the time of sale of a machine, the seller had rights. A year later a third party said that the machine infringed their patent. The patent was issued after the sale so at the time of the sale there was no breach. Nevertheless, this was held to be a breach of 14(b) as the buyers right to quiet possession of the goods was disturbed.

Stadium Finance Ltd v Robbins

There is a presumption that the owner has consented to the mercantile agent being in possession of the goods. However, this presumption is rebuttable. Owner of car gave it to dealer on the basis that, if there was interest, the dealer would get in touch; no consent to sell was given. Registration documents were locked in the glove box. Dealer broke into the glove box and sold the car. At first instance the court held that a car without a key and a log book and was not goods. CA held the owner had not consented to possession of the car by retaining the keys the rego docs (logbook) (which the dealer broke in to get). Furthermore, the goods were not sold in the ordinary course of business. It would not be in the ordinary course of the dealers business to sell a car with no key or log book.

Farquharson Bros v C King & Co Ltd

Timber merchants had their timber in a warehouse and their employee clerk had a limited authority to deal with it. The clerk set up a fraudulent scheme whereby he sold timber through a false name to innocent buyers. The timber company then wanted its timber back from the buyers. The buyers argued that whoever enabled the loss ought to bare it and the owner had enabled the fraudulent scheme to happen by employing the thief. However, the court said this was not the case. The law requires more than simply putting someone in that position, and more positive action required (e.g. Wrightcars). The timber company had not made any kind of representation to the ultimate buyers of the timber, the buyers had never heard of the timber company so there was never any holding out by that the employee that he had the right to sell the timber company's wood.

Quiet possession

Warranty allowing damages if breached

Buyer in possession

Where a buyer has possession with the consent of the seller, any disposition by that person to a good faith buyer shall have the same effect as if that person were a mercantile agent in possession with the consent of the owner: s27(2). The effect of this subsection is that, even though the seller may retain property in the goods, if he or she delivers possession of the goods to the buyer, the buyer's sale to an innocent third party will divest the original seller of his or her title. Interestingly, if the buyer obtains the sellers consent to be in possession by fraud, it is still considered consent on the part of the owner: Jethcott v Andrew Motors, confirmed in Elwin v O'Regan and Maxwell and National Employers' Mutual General Insurance Assoc Ltd v Jones

Remedies of the buyer on breach of s 14(a)

Where there is a breach of s14(a) the buyer has an option as to the remedies available. The buyer can either (i) Treat the contract as repudiated and/or claim damages. Or, (ii) Rescind the contract and recover the price on the ground that there has been a total failure of consideration