Carter, Bruce James v Makita (Australia) Pty Ltd
[1995] FCA 978
•27 NOVEMBER 1995
CATCHWORDS
SALE OF GOODS - Romalpa clause - implied term as to right to on-sell goods - whether right to sell as bailee or on own account - buyer in receivership - whether seller has proprietary interest in funds of receiver.
Corporations Law ss 418A and 424
Sale of Goods Act 1895 (S.A.) ss 18 and 21
Aluminium Industrie Vaassen B.V. v Romalpa Aluminium Ltd [1976] 1 WLR 676
Clough Mill Ltd v Martin [1985] 1 WLR 111
Codelfa Construction Proprietary Limited v State Rail Authority of New South Wales (1982) 149 CLR 337
Len Vidgen Ski & Leisure Ltd v Timaru Marine Supplies (1982) Ltd [1986] 1 NZLR 349
Puma Australia Pty Ltd v Sportsman's Australia Limited (No.2) [1994] 2 Qd.R 159
No SG 3110 of 1994
IN THE MATTER of UNITED HARDWARE (SA) PTY LTD
(RECEIVER AND MANAGER APPOINTED) ACN 059 887 213
BRUCE JAMES CARTER Applicant
- and -
MAKITA (AUSTRALIA) PTY LTD, BLACK & DECKER
(AUSTRALASIA) PTY LTD, OGDEN INDUSTRIES PTY LTD
and PHILMAC PTY LTD Respondents
- and -
OGDEN INDUSTRIES PTY LTD First cross-claimant
- and -
BRUCE JAMES CARTER Cross-respondent to
first cross-claim
- and -
BLACK & DECKER (AUSTRALASIA) PTY LTD Second cross-claimant
- and -
BRUCE JAMES CARTER First cross-respondent
to second cross-claim
- and -
UNITED HARDWARE (SA) PTY LTD Second cross-respondent
(RECEIVER AND MANAGER APPOINTED) to second cross-claim
(IN LIQUIDATION)
Branson J
Adelaide (delivered via video link-up from Hobart)
27 November 1995
IN THE FEDERAL COURT OF AUSTRALIA )
SOUTH AUSTRALIA DISTRICT REGISTRY ) No SG 3110 of 1994
GENERAL DIVISION )
IN THE MATTER of UNITED HARDWARE (SA) PTY LTD (RECEIVER AND MANAGER APPOINTED)
ACN 059 887 213
BRUCE JAMES CARTER
Applicant
- and -
MAKITA (AUSTRALIA) PTY LTD, BLACK & DECKER (AUSTRALASIA) PTY LTD, OGDEN INDUSTRIES PTY LTD and PHILMAC PTY LTD
Respondents
- and -
OGDEN INDUSTRIES PTY LTD
First cross-claimant
- and -
BRUCE JAMES CARTER
Cross-respondent to
first cross-claim
- and -BLACK & DECKER (AUSTRALASIA) PTY LTD
Second cross-claimant
- and -BRUCE JAMES CARTER
First cross-respondent
to second cross-claim
- and -UNITED HARDWARE (SA) PTY LTD (RECEIVER AND MANAGER APPOINTED) (IN LIQUIDATION)
Second cross-respondent
to second cross-claim
REASONS FOR JUDGMENT
CORAM: Branson J
PLACE: Adelaide (delivered via video link-up from Hobart)
DATE: 27 November 1995
By an application dated 30 August 1994 made pursuant to ss418A and 424 of the Corporations Law, the receiver and manager of United Hardware (SA) Pty Ltd (Receiver and Manager Appointed) (In Liquidation) ("United Hardware"), Bruce James Carter ("the applicant"), sought a declaration that Makita (Australia) Pty Ltd ("Makita"), Black & Decker Ltd ("Black & Decker"), Ogden Industries Pty Ltd ("Ogden") and Philmac Pty Ltd ("Philmac"), all creditors of United Hardware:-
(a)have no interest in debts owed to United Hardware; and
(b)have no interest in monies collected by United Hardware from its debtors.
The application contains a claim for certain alternative relief in the event that the respondents have, or any of them has, an interest in the debts or monies owed to or collected by United Hardware. It was agreed that argument as to this alternative claim should await the outcome of the principal claim for relief.
The Court ordered the applicant to file and deliver points of claim and the respondents to file and deliver points of defence. In fact, and without objection, the matter proceeded in pleadings in the usual form. Black & Decker, Ogden and Philmac each filed and served cross-claims against the applicant, and Black & Decker by leave filed and served a cross-claim against United Hardware for the purpose only of having United Hardware bound by decisions of the Court. United Hardware entered an appearance and a formal defence. Counsel, instructed by the liquidator of United Hardware, appeared at the hearing and advised that the liquidator would abide by the decision of the Court. He was granted leave to withdraw.
In January 1995 all issues between the applicant and the third respondent were settled and a written consent to the making of orders between those parties was filed pursuant to O35 r10 of the Federal Court Rules. Upon the matter being called on for hearing the Court was informed that a settlement had been reached between the applicant and the fourth respondent. On the second day of the hearing orders between those parties were made by consent. The hearing thus proceeded on the applicant's principal claim against the first and second respondents, and the second respondent's cross-claims against the applicant and United Hardware.
Background
For many years United Hardware Co-operative Ltd ("United Co-op") acted as an administrative centre and warehouse on behalf of its members. In effect it carried on the business of a hardware wholesaler to its members. Each of Makita and Black & Decker supplied products to United Co-op. From July 1993 the hardware wholesaling business previously operated by United Co-op was operated by United Hardware. The first and second respondent thereafter supplied products to United Hardware. The terms upon which such products were supplied is discussed in more detail below. However, in each case such terms included a provision that property in such products was not to pass until the products had been paid for in full.
Each of the respondents, together with other suppliers to United Hardware, co-operated with United Hardware in the operation of a "charge-through" system. The essential features of such system were as follows:-
(a)suppliers to United Hardware ("suppliers") would enter into credit arrangements with United Hardware;
(b)customers of United Hardware ("customers") would arrange credit facilities with United Hardware;
(c)such customers were free to contact suppliers and place orders with them for products to be delivered directly by them to the customer;
(d)suppliers would invoice United Hardware for products delivered to customers: copy invoices may have been provided to customers; and
(e)United Hardware would bill its customers for such stock monthly and make payment for such products to the suppliers monthly.
Some suppliers, such as Black & Decker, in addition to taking part in the "charge-through" system, provided products to United Hardware which then on-sold such products to certain of its customers from a large store-house.
On 2 June 1994 the applicant was appointed receiver and manager of the assets and undertakings of United Hardware pursuant to the terms of a mortgage debenture created by United Hardware in favour of Eudunda Farmers' Limited. At that time he took into his possession the banking records of United Hardware. He discovered that United Hardware operated only one bank account: an overdraft account with the Australia and New Zealand Banking Group ("ANZ"). At the time of his appointment the account was overdrawn in the amount of approximately $350,000-00. United Hardware also had a future liability to ANZ in respect of a bill line of $1M. As at the date of his appointment United was indebted to each of Makita and Black & Decker for products sold and delivered. Such respondents contend that the retention of title provisions in the terms upon which they traded with United Hardware give them an interest in monies due to United Hardware from its customers, and an interest in monies collected by United Hardware or the applicant from the customers of United Hardware. The applicant contends to the contrary.
The issues between the parties fall into three categories. First, whether the retention of title provisions in each case give to Makita and Black & Decker respectively proprietary interests in debts owed to United Hardware and in monies collected by United Hardware from its debtors. Secondly, assuming that in either or both cases such proprietary interest can be established, whether there is any fund or funds into which Makita and/or Black & Decker can trace monies paid to United Hardware. Thirdly, and on the same assumption as is operative with respect to the second issue, whether Makita and Black & Decker or either of them have or has a claim against the applicant relating to his failure to establish certain funds as requested by Makita and Black & Decker. As to this third issue, there is a further question as to the entitlement of Makita to seek to rely upon it without amendment to its pleadings.
The case against Makita
Makita is a supplier of power tools, spare parts and accessories. The following facts, amongst others, are agreed between the applicant and Makita:-
"16A.United purchased power tools, spare parts and accessories from Makita (paragraph 3 amended Defence).
The particulars of conditions of sale and terms of payment by United are contained in part in the following documents:
(a) -
(b)1\93 Makita Conditions of Sale and Terms of Payment - document 7
(c)2\93 Makita Conditions of Sale and Terms of Payment - document 10
The conduct and documents referred to in paragraphs 16 & 17 herein comprise the agreement between United and Makita ("the agreement").
-
-
Makita expressly allowed United customers to order goods on the account of United.
-
From July 1993 to 2 June 1994 goods were delivered by Makita to either United's premises or to the premises of United's various customers, as directed by the ordering party.
From July 1993 to 2 June 1994 invoices for the goods so ordered and delivered were sent to United for payment.
From July 1993 all payments made for the goods so ordered and delivered, were made by United to Makita. No payments were made by United's customers to Makita.
The payments received by Makita for the goods so ordered and delivered were by way of cheques drawn on the account of United at the 13 King William Street, Adelaide branch of the ANZ bank. That account was the only bank account operated by United.
The cheques bore no indication that the account on which they were drawn was a specially designated account for the payment of Makita accounts.
The account from which the cheques were paid was not an account specially designated for the payment of Makita accounts.
-
-
Prior to June 1993 all national volume discounts were credited to the account of United Co-op.
In August 1993 Makita credited the sum of $7810.00 to United for national volume discount calculated on the volume of sales in the month of July 1993.
In September 1993 Makita credited the sum of $1991.00 to United for national volume discount calculated on the volume of sales in the month of August 1993.
Prior to June 1993 all regional volume discounts were credited to the account of United Co-op.
In August 1993 Makita credited the sum of $4686.00 to United for regional volume discounts calculated on the basis of volume of sales in the month of July 1993.
In September 1993 Makita credited the sum of $1195.00 to United for regional volume discounts calculated on the basis of volume of sales in the month of August 1993.
-
-
The amount of $104,316.43 remains due to Makita from United for goods sold and delivered by Makita to United."
The Makita Conditions of Sale 1/93 and 2/93 ("the Makita conditions of sale") are each standard form documents: they were not drawn specifically to cover the trading relationship between Makita and United Hardware. Clauses 4, 5 and 13 of each of the documents are in the following terms:-
"Title and risk
4.Notwithstanding any arrangements made for the transportation of the Products to the Customer's nominated destination, all Products sold are at the risk of the Customer from the time the Products leave Makita's premises. Notwithstanding delivery and the passing of risk, title and property in the Products will not pass to the Customer or any related persons until payment in full for those Products has been received by Makita and all cheques and other negotiable instruments have been cleared. Until that time, the Customer:
(a)must promptly and at the Customer's cost return Products to Makita on demand;
(b)does and will indemnify Makita against loss or damage to the Products;
(c)must not pledge, mortgage, lend or otherwise encumber the Products without Makita's written consent;
(d)in the event of the Customer failing to make payment for Products by the due date or Makita otherwise becoming entitled to terminate the contract, irrevocably authorises Makita to enter any premises where the Products are situated and to take possession of and remove those Products without incurring any liability; and
(e)in the event of the Customer failing to make payment for Products by the due date or Makita otherwise becoming entitled to terminate the Contract, and the Customer disposing of the Products to a third party agrees that the proceeds of such sale will be kept separately until Makita has been paid in full for the Products.
Where Products which have not been paid for in part or in full are mixed with Products that have been paid for the onus is on the Customer to identify those Products paid for and, failing identification to the satisfaction of Makita, all Products that have been sold and delivered by Makita to the Customer are deemed to be the property of Makita.
Payment
Payment of Products must be made by the Customer to Makita within thirty days of the end of the month in which those Products are invoiced. Where payment is received by Makita within ten days on invoice date, and no amounts for other Products are overdue, a two and a half (2.5%) percent discount on the invoiced price will apply. Extraordinary settlement terms may be offered from time to time and will only apply to Products where specifically nominated in the relevant programmes and promotional material. Payments must be in cash or any other form acceptable to Makita and, subject to the exceptions listed in this clause, without any deduction, withholding or right of set-off or counterclaim. Any amount outstanding after the due date will incur interest at one (1%) percent plus the prime lending rate of the Commonwealth Bank of Australia at that time from the due date until payment in full is received. Any legal or other costs incurred by Makita in recovering amounts owed by the Customer to Makita must be paid to the Customer.
13. Waiver
Any failure by Makita to insist on strict compliance with the Contract or any delay by Makita in exercising its remedies under the Contract will not constitute a variation or waiver of any provision of the contract or any remedy available to Makita."
United Hardware is the "Customer" within the meaning of the above clauses.
There is no reason to conclude that clause 4 of the Makita conditions of sale is other than a valid retention of title clause (see Aluminium Industrie Vaassen B.V. v Romalpa Aluminium Ltd [1976] 1 WLR 676). Looked at in terms of the Sale of Goods Act 1895 (S.A.) ("the Sale of Goods Act"), which may be assumed to have application in the circumstances of this case, the parties have disclosed a different intention from that which would otherwise be ascertained by an application of the rules set out in s18 of the Sale of Goods Act.
The principal issue to be determined so far as Makita is concerned is the true meaning of clause 4 of the Makita conditions of sale in the context of the Makita conditions of sale as a whole. In this regard it is important to attend to the warning of Robert Goff LJ in Clough Mill Ltd v Martin [1985] 1 WLR 111 at 114 where he said:-
"There has been a spate of decisions in recent years concerning these so-called Romalpa clauses. But it is of great importance to bear in mind that these cases have been concerned with different clauses, very often in materially different terms; that different cases have raised different questions for decision; and that the decision in any particular case may have depended on how the matter was presented to the court, and in particular may have depended on a material concession by counsel. So this is a field in which we have to be particularly careful in reading each decision in the light of the facts and issues before the court in question."
It is not entirely clear whether clause 4 of the Makita conditions of sale is intended to achieve the retention of property only in products which have themselves not been paid for, or whether such retention is intended whilst any products supplied by Makita to United Hardware have not been paid for. On the view which I have taken of this case the distinction is immaterial. However, in my view, the former construction is the proper one having regard to the wording of the clause as a whole.
The case for the applicant on the first of the issues to be determined in this case, shortly put, is that clause 4 of the Makita conditions of sale can have no application in respect of products on-sold by United Hardware to its customers. In the factual circumstances of this case, this contention, if accepted, will have the result of rendering clause 4 effectively nugatory. All Makita products supplied by Makita to United Hardware were supplied via the "charge-through" system. That is, they were all on-sold by United Hardware to its customers.
It is not contended that there was a wrongful disposition of Makita's property when United Hardware on-sold such property to its customers Makita Products. It is plain that a term must be implied into the contractual arrangements between United Hardware and Makita authorising United Hardware to on-sell Makita's products which have not been paid for (Codelfa Construction Proprietary Limited v State Rail Authority of New South Wales (1982) 149 CLR 337 per Mason J at 347). The crucial issue is that of whether such implied term should be one authorising United Hardware to sell such products on its own account or on account of Makita.
It is submitted on behalf of Makita that clause 4 is to be understood as envisaging the on-selling by United Hardware of Makita products in which Makita retained title but on the basis that such sales would be sales made on behalf of Makita. Consequently, it is contended that either the proceeds of such sales were to be maintained in a separate account and held on behalf of Makita, or alternatively, that upon United Hardware failing to make payment for products by the due date, or Makita otherwise becoming entitled to terminate its contract with United Hardware, such proceeds were to be maintained in a separate account on behalf of Makita. That is, the case for Makita is that in all circumstances, or alternatively in the more limited circumstances outlined above, the Makita conditions of sale reveal an intention that United Hardware was to hold the proceeds of the sale of products supplied to it by Makita, on behalf of Makita rather than an intention that the relationship between Makita and United Hardware with respect to the goods was simply to be that of creditor and debtor.
The submission made on behalf of Makita must be assessed against the totality of the contractual arrangements between United Hardware and Makita. It is part of such objective background that Makita products would be supplied via the "charge-through" system. That is, that United Hardware would not in fact take possession of the products. In this regard the present facts are very different from those considered by the Court of Appeal in Aluminium Industrie Vaassen B.V. v Romalpa Aluminium Ltd. Clause 5 of the Makita conditions of sale provides for trading terms of payment within 30 days of the end of the month in which products are invoiced, and for discounts for prompt payments and penalties for late payments. Clause 5, construed in the context of the total contractual arrangements between United Hardware and Makita, in my view, suggests against United Hardware being obliged to keep proceeds of sales of Makita products separately from its own monies and to account for them to Makita (Len Vidgen Ski & Leisure Ltd v Timaru Marine Supplies (1982) Ltd [1986] 1 NZLR 349; Puma Australia Pty Ltd v Sportsman's Australia Limited (No.2) [1994] 2 Qd.R 159 per Shepherdson J at 169-170 and Williams J at 178).
The terms of paragraph (e) of clause 4 of the Makita conditions of sale also suggest against any such general obligation. Paragraph (e) provides for the proceeds of sales to be kept separately in certain limited circumstances. That is, in the event that products have not been paid for by the due date or Makita otherwise being entitled to terminate the contract. In such events, the agreement is that "... the proceeds of such sale will be kept separately until Makita has been paid in full ...". A provision that proceeds are to be kept until payment, rather than that they should be held on behalf of Makita effectively as payment, does not, in my view, carry the implication that such proceeds are held on trust. Moreover, an obligation to keep proceeds of sale separately in limited circumstances, suggests against a general obligation to keep such proceeds separately and to account for them.
Is an implication into the contractual arrangements between United Hardware and Makita of a term allowing the on-selling by United Hardware on its own behalf of products supplied by Makita, an implication of a term which defeats the intention disclosed by clause 4 of the Makita conditions of sale and thus an implication which ought not to be made? In my view this question can only be answered against the background that the Makita conditions of sale are standard form conditions which it is accepted cover its trading with a wide range of parties. Nothing before me suggests that clause 4 was drawn by a drafter with the "charge-through" system in mind. The construction which I have placed on clause 4 in the circumstances of this case does not necessarily mean that it will be rendered of little, if any value, in other trading circumstances in which it is relied upon by Makita.
Mr Besanko QC, who appeared with Mr Robertson for Makita, challenged the widely held view that a fiduciary relationship is a prerequisite of an equitable proprietary remedy. He is not alone in challenging this view (see Goff & Jones, The Law of Restitution (4th ed, Sweet & Maxwell, London) at p93; Tilbury MJ, Civil Remedies Volume 1 Principles of Civil Remedies (1990, Butterworths, Sydney) para 4115). It is not necessary for me to reach a conclusion in this regard. In my view, the Makita conditions of sale do not indicate an intention in the parties that United Hardware would in any circumstances hold proceeds of the sale of Makita products on behalf of Makita. In the light of this finding no question of an equitable proprietary remedy arises.
The case against Black & Decker
The following facts, amongst others, are agreed between the applicant and Black & Decker:-
"11.At all material times Black & Decker carried on business as a manufacturer of housewares, power tools and outdoor accessories and the wholesaler of housewares, power tools, spare parts and outdoor accessories.
12.Prior to 30 June 1993 Black & Decker supplied goods to members of United's predecessor United Hardware Co-operative Ltd (United Co-op") for a number of years.
13.Prior to 30 June 1993 United Co-op had formed a co-operative with various retail hardware outlets (referred to as members) whereby United Co-op acted as an administrative centre and warehouse on behalf of members in return for a fee and dealt with Black & Decker as follows:-
(a) -
(b)Black & Decker would deliver the ordered goods to either United Co-op's main warehouse in Royal Park, South Australia or direct to United Co-op's members;
(c)In most cases Black & Decker goods were delivered to United Co-op's members;
(d)As soon as an order was received by Black & Decker, Black & Decker would raise an invoice addressed to United Co-op;
(e)Black & Decker delivered a copy of the invoice with the goods direct to United Co-op's members and at the same time the original of the invoice was delivered to United Co-op;
(f) -
(g)Certain rebates, incentives and discounts applied pursuant to Black & Decker's terms and conditions of sale and terms of payment.
14.The particulars of conditions of sale and terms of payment by United Co-op are contained in the following documents:
Letter from Black & Decker to United Co-op dated 30 October 1992 - document 23
Terms and conditions printed on the reverse side of Black & Decker invoices - document 24
15.On or about 10 June 1993 United Co-op notified Black & Decker by letter that:
(a)United Co-op was merging with Eudunda;
(b)The merger would be complete by 30 June 1993;
(c)As at 1 July 1993 the business previously operated by United Co-op would be operated by United on the same basis as it had previously been operated;
(d)all commitments, liabilities and obligations of United Co-op would be met by United.
16.From 1 July 1993 Black & Decker commenced to trade with United on exactly the same terms as it had previously traded with United Co-op which were as follows:
(a)United or United retailers would order Black & Decker goods direct from Black & Decker;
(b)Black & Decker would deliver the ordered goods to either United's main warehouse in Royal Park, South Australia or direct to United's retailers;
(c)In most cases Black & Decker goods were delivered to United's retailers;
(d)As soon as an order was received by Black & Decker, Black & Decker would raise an invoice addressed to United;
(e)Black & Decker delivered a copy of the invoice with the goods direct to United's retailers and at the same time the original of the invoice was delivered to United;
(f)United paid Black & Decker the cost of the goods less certain discounts and rebates
30 days net from the date of each monthly statement;
(g)Certain rebates, incentives and discounts applied pursuant to Black & Decker's terms and conditions of sale and terms of payment.
17.The particulars of conditions of sale and terms of payment by United are contained in the following documents:
Documents 23 and 24
Trading Terms Agreement 1993\4 - Document 25
to 21. -
22.From July 1993 to 2 June 1994 goods were delivered by Black & Decker to either United's premises or to the premises of United's various retailers, as directed by the ordering party.
23.From July 1993 to 2 June 1994 invoices for the goods so ordered and delivered were sent by Black & Decker to United for payment, and a copy of the invoice was sent with the goods delivered.
to 28. -
29.United did not keep the proceeds of sale of Black & Decker goods separately.
30.Prior to June 1993 all function fee volume rebates as defined in the agreement were credited to the account of United Co-op on a monthly basis calculated on the basis of the volume of sales in the preceding month.
to 36. -
37.The amount of $57,853.72 remains due to Black & Decker from United for goods supplied by Black & Decker to United and United's retailers pursuant to the terms of the agreement."
As to the amount referred to in paragraph 37 above, it is agreed that the net amount owing is $26,809-00.
Documents 23, 24 and 25, referred to in paragraph 17 of the Black & Decker agreed statement of facts comprise a copy
letter from Black & Decker to United Co-op dated 30 October 1992 concerning trading terms, a copy Black & Decker Invoice/Statement with terms and conditions of sale reproduced on the reverse side and a Black & Decker document headed "Trading Terms Agreement 1993/94" which names United Hardware as the customer. Each of these documents provides for payment for products to be due on or prior to 30 days from the end of the month in which such product is supplied. Documents 23 and 25 provide for the payment by Black & Decker to United Hardware of various rebates to be calculated by reference to the value of purchases of products by United Hardware from Black & Decker. Each of these two documents appears to provide for such rebates, when payable, to effect a reduction in the amounts payable by United Hardware to Black & Decker.
Documents 23 and 24 contain substantively identical provisions as to the rights of Black & Decker pending full payment to it of all sums outstanding from United Hardware. The following is taken from document 23:-
"4. TERMS OF SALE
Until full payment has been made of the price of any goods purchased from Black & Decker covered by this Agreement, and any other sums whatsoever outstanding from United Hardware to Black & Decker from time to time covered by this Agreement:
4.1The price shall become immediately due if United Hardware makes default in any other sums due to Black & Decker or if United Hardware shall become bankrupt or commit any act of bankruptcy or compound with its creditors or have judgment entered against it in any court or, being a company, have a provisional liquidator, liquidator, receiver or manager appointed.
4.2The property in the goods shall not pass to United Hardware and United Hardware shall keep the goods as bailee for Black & Decker (returning the same to Black & Decker upon request). The goods shall nevertheless be at the risk of [United Hardware] from the time of delivery.
4.3Black & Decker is irrevocably authorised to enter any premises where the goods are kept, and to use the name of United Hardware and to act on its behalf, if necessary, to recover possession of the goods."
Black & Decker provided products pursuant to its contractual arrangements with United Hardware via the "charge-through" system and by the delivery of products to United Hardware itself. The products delivered to United Hardware were destined for sale by it from the large store-house referred to above.
As I understand it, products supplied by Black & Decker directly to United Hardware which remained in the possession of United Hardware at the date of the appointment of the applicant, have been acknowledged by the applicant to have been the property of Black & Decker at that date. These proceedings raise no issues as to those products.
The first matter which is in issue between United Hardware and Black & Decker is as to the proper construction of clause 4 above, and particularly sub-clause 4.1, in the context of the total contractual arrangements between United Hardware and Black & Decker.
As with the contractual arrangements between United Hardware and Makita, the contractual arrangements between United Hardware and Black & Decker do not expressly provide for United Hardware to on-sell products which it has not paid for. As with the contractual arrangements between United Hardware and Makita, a term allowing such on-selling must be implied. In the circumstances of the arrangements between United Hardware and Black & Decker should such term be one which authorises United Hardware to sell on its own behalf or on behalf of Black & Decker? If authorised to sell on its own behalf the relationship between United Hardware and Black & Decker with respect to such products would be that of creditor and debtor: if authorised to sell on behalf of Black & Decker, United Hardware would hold the proceeds of such sale on account of Black & Decker.
It may be assumed that clause 4 is intended to provide protection to Black & Decker in the event of United Hardware becoming insolvent. Plainly it is apt to achieve, and has achieved, this result in respect of goods in the possession of United Hardware at the crucial time. I do not consider that it is effective to do so in circumstances in which products have been on-sold by United Hardware.
I am influenced in reaching the above decision by such of the factors referred to above in respect of Makita which are applicable to the contractual arrangements between United Hardware and Black & Decker. In addition, the reference in sub-clause 4.2 to United Hardware "... keep[ing] the goods as bailee for Black & Decker ..." is, in my view, addressed only to the circumstance in which United Hardware retains possession of Black & Decker products. This appears to me to be made plain by the obligation to "keep" the goods and by the reference to "returning the same to Black & Decker upon request". Once possession and title to such goods had passed to one of its customers, United Hardware would be unable to honour either of these obligations. Sub-clause 4.3 similarly can have no application in circumstances where United Hardware has validly on-sold goods - as it must be implied that it can. The sub-clause cannot be read as authorising Black & Decker to enter premises of a person or entity not a party to the sub-clause to recover possession of goods validly sold to them (s21 of the Sale of Goods Act).
In my view, the express provision for United Hardware to keep goods as bailee for Black & Decker suggests against United Hardware having undertaken wider obligations to Black & Decker as bailee of such goods. In my view the proper construction of the contractual arrangements between United Hardware and Black & Decker is that United Hardware holds goods in which Black & Decker retains title as bailee for Black & Decker. However, its implied authority to on-sell goods, of which it may not have taken delivery, is an implied authority to do so on its own account and not as bailee for Black & Decker. On this basis the relationship between United Hardware and Black & Decker in respect of the proceeds of goods so on-sold is
that of debtor and creditor.
As in the case with Makita, my conclusions as to the proper construction of the contractual arrangements between United Hardware and Black & Decker make it unnecessary for consideration to be given to issues of tracing and alleged contractual breaches by the applicant.
As requested by counsel, I will hear counsel as to the terms of orders to be made.
I certify that this and the preceding pages are a true copy of the Reasons for Judgment of the Honourable Justice Branson.
Associate:
Dated:
Counsel for the applicant : Mr N W Morcombe QC
and first cross-respondent with him
to second cross-claim Ms C A Mitchell
Solicitors for the applicant : Cowell Clarke
and first cross-respondent
to second cross-claim
Counsel for the respondent : Mr A J Besanko QC
Makita (Australia) Pty Ltd with him
Mr I C Robertson
Solicitors for the respondent : Georgiou & Co
Makita (Australia) Pty Ltd
Counsel for the respondent : Mr J Wardlaw
Black & Decker (Australasia)
Pty Ltd and second
cross-claimant
Solicitors for the respondent : Lewis Hutchinson
Black & Decker (Australasia)
Pty Ltd and second
cross-claimant
Hearing Dates : 11 & 12 September 1995
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