GE Commercial Corporation (Aust) Pty Ltd v Mell Associates Pty Ltd

[2009] NSWSC 787

CITATION:	GE Commercial Corporation (Aust) Pty Ltd v Mell Associates Pty Ltd & Ors [2009] NSWSC 787
HEARING DATE(S):	29 & 30 July 2009
JUDGMENT DATE :	13 August 2009
JURISDICTION:	Equity Division
JUDGMENT OF:	Palmer J
DECISION:	Declaration as sought by Plaintiff; Amended Cross Claim dismissed.
CATCHWORDS:	SALE OF GOODS – TITLE – RETENTION – CONTRACT – Whether statements on face of invoice were contractual terms – whether printed conditions on back of invoice were incorporated into contract – whether inconsistency – whether retention of title clauses authorised on-sale by dealer under floor plan with passing of title.
LEGISLATION CITED:	Sale of Goods Act 1923 (NSW) – s 22, s 26(1), s 28(2)
CATEGORY:	Principal judgment
CASES CITED:	- Aluminium Industrie Vaassen BV v Romalpa Aluminium Ltd [1976] 2 All ER 552 - Chattis Nominees Pty Ltd v Norman Ross Homeworks Pty Ltd (Receiver Appointed) (In liq) (1992) 28 NSWLR 338 - Cory Brothers & Co Ltd v Owners of the Turkish Steamship ‘Mecca’ [1897] AC 286 - Farrow Finance Co Ltd (in liq) v ANZ Executors and Trustee Company Ltd [1998] 1 VR 50 - Hillas & Co Ltd v Arcos Ltd [1932] All ER Rep 494 - L’Estrange v F. Graucob Ltd [1934] 2 KB 394 - Meehan v Jones (1982) 149 CLR 571 - Simson v Ingham (1823) 2 B & C 65 - Toll (FGCT) Pty Ltd v Alphapharm Pty Ltd (2004) 219 CLR 165 - The Council of the Upper Hunter County District v Australian Chilling & Freezing Co Ltd (1968) 118 CLR 429
PARTIES:	GE Commercial Corporation (Australia) Pty Ltd (Plaintiff/First Cross Defendant) DMS Davlan Pty Ltd (Second Cross Defendant) Mell Associates Pty Ltd (First Defendant) Parravan Caravan Hire Service Pty Ltd (Second Defendant) LMC Caravan GmbH & Co KG (Third Defendant/Cross Claimant)
FILE NUMBER(S):	SC 2012/09
COUNSEL:	G.K. Burton SC, A.J. Bulley (Plaintiff/Cross Defendants) R.J. Weber SC, A.E. Maroya (Third Defendant/Cross Claimant)
SOLICITORS:	DibbsBarker (Plaintiff/Cross Defendants) Holman Webb (Defendants/Cross Claimant)

v Mell Associates Pty Ltd & Ors

JUDGMENT

13 August, 2009

Introduction

1 The Plaintiff (“GE”) seeks a declaration that it has title to certain caravans and motor homes (collectively “the Caravans”) which it says it has acquired from a retailer, Oakhurst International Caravans Pty Ltd (“Oakhurst”) under a floor plan financing arrangement. Oakhurst is now in liquidation and is not a party to the proceedings. The only active defendant in the proceedings is the Third Defendant LMC Caravan GmbH & Co KG (“LMC”), a German corporation, which manufactured the Caravans and sold them to Oakhurst. LMC says that it has not been paid for the Caravans and that it has the benefit of a retention of title clause in its contract for sale with Oakhurst. By its Amended Cross Claim, LMC seeks a declaration that it has title to the Caravans.

2 The Caravans, fifty-eight in all, have been identified by serial numbers as set out in a list agreed between the parties: Exhibit P3.

3 Although LMC is a German corporation and the invoices which it says contain the relevant retention of title clauses are in German, the parties have agreed that this dispute is to be determined according to the law of New South Wales or Queensland. As there is no relevant difference in the applicable legislation of Queensland and New South Wales, I will refer only to the New South Wales legislation for the sake of convenience.

The facts

4 The facts are not in dispute.

5 Between 2004 and 2008, LMC sold and delivered caravans, motor homes and spare parts to Oakhurst, a dealer or distributor. Oakhurst went into voluntary administration on 13 March 2009 and is now in liquidation.

6 The course of dealing between LMC and Oakhurst was that when LMC sold caravans to Oakhurst, it would send an invoice to Oakhurst identifying the goods sold and the amounts payable in Euros. LMC says that all goods sold to Oakhurst were sold pursuant to contractual terms printed on each of the invoices and that those terms were, by a course of dealing between the parties, incorporated into each contract for the sale and delivery of caravans ordered by Oakhurst. The terms printed on the invoice contain a retention of title clause upon which LMC relies. I will return to the content of the invoices shortly.

7 In order to finance the purchase of caravans from LMC, Oakhurst entered into a floor plan arrangement with GE. The terms of that arrangement are contained in a Distributorship Agreement dated 1 May 2007, a Bailment Agreement dated 27 February 2004 and a Fixed and Floating Charge dated 27 February 2004.

8 The Distributorship Agreement relevantly provided that upon payment by GE of the purchase price for any goods, full and absolute ownership of the goods would vest in GE without the need for physical delivery: Clause 3. The Bailment Agreement relevantly provided that Oakhurst warranted that upon purchase of goods from it, GE would have absolute and clear title and would be entitled to possession free of all adverse interests: Clause 3.1.5.

9 The way in which the floor plan arrangement operated as between LMC, Oakhurst and GE from 2004 to 2008 was as follows:

– Oakhurst ordered caravans from LMC;

– LMC issued to Oakhurst an invoice for each order, showing the caravans sold and the price in Euros for each caravan ordered;

– Oakhurst sent to GE the LMC invoice, or a batch of LMC invoices, together with a Payment Statement which showed in four columns:
an invoice number
a model description for each item of stock;
a chassis number or serial number for each item;
the purchase price of each item in Euros;

– all of these particulars in the Payment Statement were taken from the LMC invoices from which the Payment Statement had been compiled;

– following receipt of the Payment Statement from Oakhurst, GE would notify Oakhurst of the AUD exchange rate for each item of stock on the Payment Statement;

– Oakhurst would then update the Payment Statement to include the AUD amount for each item which corresponded with the Euro amount, calculated at the exchange rates applied by GE, and would forward that updated payment statement to GE together with an invoice showing the AUD purchase price for each item. The invoice reproduced the particulars as to each item appearing on the corresponding LMC invoices, save that the amounts were shown in AUD;

– in accordance with Oakhurst’s direction, GE then paid the purchase price for the goods in the Payment Statement, in Euros, to LMC by direct transfer from GE’s bank account to LMC’s bank account.

10 All that LMC would receive from GE was a payment of a substantial sum of money into its bank account on a regular basis. In order to keep track of what goods sold by it to Oakhurst were paid for by these payments from GE, LMC sent to Oakhurst at regular intervals a spreadsheet listing particulars of all goods supplied by it to Oakhurst. At LMC’s request, Mr Moller, a director of Oakhurst, marked with a cross on the spreadsheet which items were paid for by the payments received by LMC from GE and returned the spreadsheet to LMC. LMC then appropriated the payments from GE to the purchase price of the items sold to Oakhurst in accordance with the markings made by Mr Moller in the spreadsheet.

11 Mr Moller also supplied GE regularly with lists of caravans sold by Oakhurst to GE under the floor plan, showing the items paid for by the various payments made by GE to LMC at Oakhurst’s direction. Unfortunately, there were discrepancies between the lists supplied by Mr Moller to GE and the spreadsheets supplied by him to LMC. After a great deal of cross-checking it is now agreed between the parties that the fifty-eight caravans the subject of these proceedings appear in the records of LMC as not having been paid for out of the amounts received from GE while the contrary appears in the records of GE.

12 As, according to LMC’s records, the fifty-eight caravans have not been paid for by Oakhurst, LMC relies upon the retention of title clause which it says is part of each contract for supply with Oakhurst and it says that it still owns the Caravans.

The issues

13 GE says that:

i) there was no retention of title clause in any contract for sale between LMC and Oakhurst;

ii) if there is a contract for sale between LMC and Oakhurst containing any retention of title provision, those provisions are so inconsistent as to be void for uncertainty;

iii) if the retention of title provisions are contractual and are not void for uncertainty:

– their provisions expressly authorise an on-sale by Oakhurst to GE and convert security for payment of the purchase price from a retention of title clause to a right to receive and collect the sale price for the goods received or receivable by Oakhurst;

– alternatively, the retention of title provisions impliedly authorised Oakhurst to on-sell the Caravans to GE and to pass clear title to it;

iv) in any event, payment has been made to LMC for the fifty-eight Caravans so that the retention of title provisions are no longer relevant: the payments by GE to LMC have been appropriated to the purchase of items according to the lists provided by Oakhurst to GE, not according to the lists provided by Oakhurst to LMC;

v) because LMC knew at all relevant times that Oakhurst was on-selling the Caravans to GE pursuant to a floor plan arrangement and because it was receiving payment for caravans direct from GE, it is precluded by its conduct from denying the passing of title to GE under s 26(1) Sale of Goods Act 1923 (NSW) and under the general law of estoppel;

vi) Oakhurst was a “buyer in possession with the consent of the seller” and sold to GE (a purchaser in good faith without notice of LMC’s claim under the retention of title clause) in the ordinary course of business so that GE obtains good title to the Caravans as against LMC under s 28(2) Sale of Goods Act ;

vii) if the retention of title provisions are construed in the way for which LMC contends, they create in law an equitable charge over the Caravans and, as a purchaser for value in good faith without notice of LMC’s equitable interest, GE, as the purchaser of the legal title, has priority over LMC as equitable chargee;

viii) GE made payments to LMC in the belief that the payments were appropriated to the fifty-eight Caravans, in accordance with the lists supplied to it by Mr Moller, and in the belief that clear title in those Caravans would vest in GE pursuant to the Distributorship and the Bailment Agreements. If that belief was mistaken, GE has paid the money appearing in its records as payment for the fifty-eight Caravans under a mistake, so that it is entitled to recover that money from LMC as money had and received to its use.

14 I will deal with LMC’s contentions in response in the course of discussion of each of GE’s contentions.

Whether sale contract included any retention of title clause

15 Mr Burton SC, who appears with Mr Bulley of Counsel for GE, says that there is no evidence which can support a finding that the terms and conditions printed on the back of the LMC invoice were received by Oakhurst.

16 Mr Karras, the responsible officer of LMC during the period from 2004 to 2008, says that the printed terms were on the back of each invoice sent by LMC to Oakhurst during that period. There is no evidence to the contrary. I accept the evidence of Mr Karras. I find that the terms on the back of the invoice were received by Oakhurst each time goods were invoiced to it.

17 On the front of each invoice appears (translated from the German): “We supplied you on the basis of our general Conditions of Sale and Delivery” and “Our supplies, services and offers are made on the basis of our General Conditions of Trade”. On the back of each invoice the printed terms are described as “Conditions of Sale and Delivery”. Despite the difference between the description “General Conditions of Trade” and “Conditions of Sale and Delivery” on the front of the invoice, I am satisfied that it is reasonable to infer that both phrases refer to the terms printed on the back of the invoice. No document described as “General Conditions of Trade” has been produced or referred to; the words “Sale and delivery” and “trade” are close enough in this context to be synonymous.

18 There is no evidence that Oakhurst ever objected to the inclusion in any contract for sale of any of the terms printed on the back of the invoice. Mr Burton, correctly, does not take any point that the terms are in German. There is no evidence whether Mr Moller of Oakhurst read the printed terms and whether, if he did, he understood them. If Oakhurst continued to deal with LMC on the basis of printed terms which it could not understand, without requiring a translation or protesting, then it could not be heard to say that it did not accept the terms: L’Estrange v F. Graucob Ltd [1934] 2 KB 394; Toll (FGCT) Pty Ltd v Alphapharm Pty Ltd (2004) 219 CLR 165.

19 I find that by a course of dealing between the parties from 2004 onwards the terms printed on the back of the invoices sent to Oakhurst for goods ordered by it were incorporated as terms in each contract for sale between the parties: Chattis Nominees Pty Ltd v Norman Ross Homeworks Pty Ltd (Receiver Appointed) (In liq) (1992) 28 NSWLR 338, at 343 per Cohen J, and see the cases cited by his Honour.

Whether retention of title terms void for uncertainty

20 Mr Burton says that the provisions as to retention of title appearing on the front and on the back of the invoice are so mutually inconsistent that all provisions as to retention of title, including those printed on the back of the invoice, are void for uncertainty.

21 On the face of the invoice appears:

– at the top “We supplied you on the basis of our general Conditions of Sale and Delivery” ;

– under the identification of the goods appears:
“The receivables referred to in this invoice together with all related rights including the retention of title to all goods mentioned herein have been assigned to GE Commercial Distribution Finance Europe Ltd. (‘CDF’). Payment should be made to CDF directly in accordance with the provisions of the master dealer agreement between you and CDF.”


– further down: “The vendor remains, until complete payment, the unrestricted owner of the supplied goods.” I will refer to this retention of title provision as ROT-1 ;

– at the bottom left:
“Our supplies, services and offers are made on the basis of our General Conditions of Trade. The goods remain our property until the complete payment of the aggregate liabilities which arose from the business relationship.”
I will refer to this retention of title provision as ROT-2 ;

22 Amongst the printed terms on the back of the invoice appears Clause 3, which provides, so far as is presently relevant:

“ Title retention

We retain the right of title in the purchased product until all payments originating from the business relationship with the dealer are received. (I will refer to this retention of title provision as ROT-3 ) Title retention remains in place, even if individual receivables by the reseller are included in the running account, or if the accounting balance is being drawn and accepted. To the extent that an agreement exists about payment of the receivable purchase price by way of a cheque/bill of exchange process [footnote], the retention of title is maintained even in the case where the bill of exchange accepted by us is redeemed and is not extinguished by the received cheque in our favour being presented to the bank.

If the dealer displays conduct in breach of contract, specifically delays in payment, we shall be entitled to claiming the goods back after setting an appropriate time limit. We shall be entitled to reclaim the purchased product for the purpose of disposing of it; any proceeds of the disposal shall be offset against the dealer’s liabilities after appropriate disposal charges have been deducted.

…

The dealer may on-sell the goods in the course of his/her normal business activities; however, he/she shall cede immediately all receivables up to the total of our invoice (including VAT) which are due to him/her from his/her customers or from third parties, which are due to his/her on-selling of the product, irrespective of it being sold with or without further work having been carried out on it. The dealer shall be authorised to collect the receivables concerned, even after the cession. Our own right to collect the receivables remains unaffected. However, we make the commitment of not collecting the receivables as long as the dealer continues to fulfil his/her payment obligations from moneys received, avoids going into default and/or specifically does not apply for insolvency proceedings to be instigated and/or stops making payments altogether. Should such a situation occur we shall be in a position to demand that the ceded receivables and debtor concerned are disclosed to us by the dealer, that all details needed for collection are revealed, that all relevant documentation is handed over and that the debtor (third party) is informed of the cession. …” (I will refer to this as ROT-4 .)

23 As I have noted above, I have found that Clause 3 of the printed terms is a term of each contract for sale between the parties. Mr Burton says that ROT-1 and ROT-2 are also intended to be contractual terms, and that they are inconsistent with Clause 3 of the printed terms to such an extent that all retention of title provisions in the contract are void for uncertainty.

24 I am unable to accept this submission. It is certainly correct that, if ROT-1 and ROT-2 are contractual terms, they are mutually inconsistent. ROT-1 provides that title in the goods supplied by this invoice remains with LMC until payment for those goods is made whereupon, presumably, title is to pass to Oakhurst. The second sentence of ROT-2, on the other hand, provides that title passes in the goods supplied by the invoice only when all moneys due to LMC by Oakhurst during the course of the dealership have been paid – a fact that may not be ascertainable until many years after the supply of the goods in the invoice, payment for those goods by Oakhurst has been made and Oakhurst has on-sold those goods to third parties who may, in turn have on-sold to others.

25 Further, ROT-2 is internally inconsistent. The second sentence is at odds with the first sentence, which incorporates Clause 3 of the terms printed on the back of the invoice, including ROT-4, which authorises on-sale and the passing of title during the course of the dealership.

26 All of these difficulties arise only if ROT-1 and ROT-2 are construed as contractual terms. However, when one looks at the original document as a whole, interpreting it as a commercial document and reading it as commercial people would, one gets the clear impression that ROT-1 and ROT­-2 are no more than reminders, not intended to be contractual terms in themselves, in very summary form that there is a retention of title clause amongst the contractual terms printed on the back of the invoice and that retention of title, pursuant to that clause, is an important contractual provision of which all purchasers from LMC should be aware. I observe, in this regard, that the language in ROT-1 and ROT-2 is general and imprecise whereas the contractual provisions appearing on the back of the invoice – and particularly Clause 3 – are highly detailed and carefully worded. It is highly improbable that any commercial person would interpret the very brief and imprecise statements in ROT-1 and ROT-2 as modifying or even overriding the detailed contractual terms set out on the back of the invoice.

27 It must be borne in mind that not everything appearing on the front of the invoice can be interpreted as a contractual term. For example, it is relevant to note that the statement on the front of the invoice “The receivables referred to in this invoice …” is in fact erroneous and inapplicable to all transactions between the parties, as Mr Burton concedes.

28 To construe ROT-1 and ROT-2 as contractual terms produces a completely irreconcilable conflict in the contract as to what retention of title provisions apply. To construe ROT-1 alone as the sole retention of title provision in the contract ignores the second sentence of ROT-2. Similarly, to construe the second sentence of ROT-2 as the sole retention of title provision ignores ROT-1 and produces a commercially bizarre result, as I have explained later. To read ROT-1, ROT-2, ROT-3 and ROT-4 as all being terms of the contract intended to have equal force produces such a state of uncertainty as to compel the conclusion that all retention of title clauses are void. However, it is clear from the document as a whole that both parties regarded a retention of title clause as of vital importance.

29 The law strives to adopt a construction of a contract, particularly a commercial contract, which preserves rather than destroys the bargain: Hillas & Co Ltd v Arcos Ltd [1932] All ER Rep 494, at 499; Meehan v Jones (1982) 149 CLR 571, at 589; The Council of the Upper Hunter County District v Australian Chilling & Freezing Co Ltd (1968) 118 CLR 429, at 436-7.

30 I prefer a construction of the contract as a whole which avoids, on the one hand, upholding a contract with no valid retention of title provision at all, and on the other, upholding either ROT-1 or ROT-2 and rejecting ROT-3 and ROT-4, when neither ROT-1 nor ROT-2 alone produces the practical commercial result which ROT-3 and ROT-4 provide.

31 For these reasons, I do not construe ROT-1 or ROT-2 as intended to be contractual terms: they are merely references, by way of reminder, to what appears in LMC’s Conditions of Sale and Delivery. I am satisfied that the only contractual provisions which regulate the retention of title as between the parties are those set out in Clause 3 on the back of the invoice.

Whether Clause 3 authorises on-sale with title

32 The first sentence of Clause 3 (ROT-3) retains title to LMC in the sold goods “until all payments originating from the business relationship with the dealer are received”. Obviously, the relationship between LMC and a dealer such as Oakhurst can continue for many years, as it has done in the present case, with a running account kept between the parties.

33 If, as in this case, the business relationship ends with the dealer going into liquidation with money outstanding to LMC, ROT-3, if applied without qualification, would mean that none of the customers to whom Oakhurst has sold caravans over the years has had good title to those caravans as against LMC. Accordingly, caravans sold as long ago as 2004 could now be repossessed by LMC, regardless of whether they remain in the hands of the original purchasers from Oakhurst.

34 Such a result would have surprising and highly uncommercial consequences. Oakhurst could not purport to sell caravans to anyone, whether GE or a retail customer, without telling purchasers expressly that they were not getting title and might have to wait for years until the dealership with LMC ended before they knew whether they would get title, or not. For Oakhurst to sell without making this express disclosure would be grossly misleading and deceptive and, indeed, positively dishonest. Any prospective customer contemplating a purchase from Oakhurst, on being told of LMC’s right of repossession, would very sensibly baulk at the purchase. It is to avoid these obviously uncommercial consequences that ROT-4 goes on to provide:

“The dealer may on-sell the goods in the course of his/her normal business activities; however, he/she shall cede immediately all receivables up to the total of our invoice (including VAT) which are due to him/her from his/her customers or from third parties, which are due to his/her on-selling of the product, irrespective of it being sold with or without further work having been carried out on it. The dealer shall be authorised to collect the receivables concerned, even after the cession. Our own right to collect the receivables remains unaffected.”

35 Mr Burton says that ROT-4 avoids the uncommercial consequences of ROT-3 being applied without qualification. While ROT-3 applies so long as Oakhurst itself has not on-sold a caravan for which payment has not yet been made, ROT-4 expressly authorises on-sale by Oakhurst to its customer and the passing of good title to the customer, converting LMC’s retention of title security for payment into a right to receive and collect the price payable to Oakhurst by the customer, or a third party, for that caravan: in other words, Oakhurst assigns to LMC the right to receive the proceeds of sale.

36 Mr Burton relies on Aluminium Industrie Vaassen BV v Romalpa Aluminium Ltd [1976] 2 All ER 552, the facts of which, he says, are indistinguishable from the present case in so far as now relevant.

37 In Aluminium Industrie the plaintiffs sold aluminium foil to the defendants to be used in the manufacture of goods by the defendants. A retention of title clause in each contract of sale provided: “The ownership of the material to be delivered by [the plaintiffs] will only be transferred to [the defendants] when [they have] met all that is owing to [the plaintiffs]”. The clause then provided for cases in which the foil was mixed with other material by the defendants for the purpose of manufacturing goods. The defendants were given an express right to sell the goods to third parties on condition that, so long as the defendants had not fully discharged their indebtedness to the plaintiffs, they would, on request, assign to the plaintiffs the benefit of their rights to the proceeds of sale. It was accepted by the parties, by the trial judge and by the Court of Appeal that the sales of the material by the defendants to third parties had been authorised by the contract and that the purchasers of the goods from the defendants acquired valid title to the goods as against the plaintiffs. The only question in the case – which does not arise in this case – was whether the plaintiffs were entitled to trace the proceeds of the sales because there was a fiduciary relationship between the plaintiffs and the defendants.

38 Mr Weber SC, who appears with Mr Maroya for LMC, says that ROT-1 is a contractual term which overrides ROT-4. The result, he says, is that since LMC has not been paid for the fifty-eight Caravans sold to GE, it still has title to them. I have already held that ROT-1 does not have contractual effect. This argument fails.

39 Mr Weber next submits that the second sentence of ROT-2 has contractual effect and overrides ROT-4. For the reasons I have given, this argument also fails.

40 Next, Mr Weber submits that ROT-4 should be interpreted so that “on-sell” means simply “agree to sell”, not carry out a sale and pass title. He says that the result is that when Oakhurst “sells” a caravan to GE or to a customer, LMC has the benefit of the right to collect the proceeds of sale from Oakhurst or the customer and has, in addition, retention of the title in the caravan until all moneys due to LMC during the course of the dealership are paid in full. As I have earlier noted, the result would be that no purchaser of a caravan from Oakhurst could know whether he or she had title until, possibly, many years after the proposed sale. Such a bizarrely uncommercial result is not, in my opinion, the intention of ROT-4. As Mr Burton correctly says, ROT-4 intends, as did a similar clause in Aluminium Industrie, that Oakhurst is authorised to on-sell caravans in the course of its business, validly passing title thereby, and in substitution for its retention of title security for payment LMC is to have the right to receive and collect the proceeds of sale.

41 It follows that in the present case, the sale by Oakhurst to GE having been made in the ordinary course of Oakhurst’s business, title in the fifty-eight Caravans has validly passed to GE pursuant to ROT-4 and GE is now entitled to possession of the Caravans as against LMC. This conclusion is sufficient to dispose of the case.

42 However, as the case will doubtless go on appeal, it is appropriate that I record briefly my conclusions as to the other arguments made by the parties.

Appropriation

43 Mr Burton submits that, because Oakhurst advised GE in the reconciliations passing between Oakhurst and GE that payments by GE to LMC had been made in respect of the fifty-eight Caravans, it follows that, as between Oakhurst and LMC, those payments have been appropriated in payment of the fifty-eight Caravans even though there was no communication between Oakhurst and LMC appropriating payments in that way.

44 I am unable to accept this submission. It is well established that if a debtor makes a payment to a creditor to whom he owes debts on more than one account, he has the right to say to which of those debts the payment is to be appropriated. If he does not, by some communication to the creditor, make a specific appropriation at the time of the payment, the right of appropriation devolves upon the creditor: see Simson v Ingham (1823) 2 B & C 65, at 72; 107 ER 310; Cory Brothers & Co Ltd v Owners of the Turkish Steamship ‘Mecca’ [1897] AC 286; Farrow Finance Co Ltd (in liq) v ANZ Executors and Trustee Company Ltd [1998] 1 VR 50, at 62.

45 There was no communication, either by Oakhurst or by GE as agent of Oakhurst, to LMC at any time appropriating any payments made by GE to the fifty-eight Caravans; indeed, the only communication to LMC of appropriation, i.e. the spreadsheets provided by Mr Moller to LMC, advise that payments from GE were not appropriated to the fifty-eight Caravans. That Mr Moller had communicated the opposite to GE is irrelevant. The result is that LMC has not received payment for the fifty-eight Caravans.

Section 26(1) Sale of Goods Act

46 Section 26(1) provides:

“ Sale by person not the owner

(1) Subject to the provisions of this Act, where goods are sold by a person who is not the owner thereof and who does not sell them under the authority or with the consent of the owner, the buyer acquires no better title to the goods than the seller had, unless the owner of the goods is by the owner’s conduct precluded from denying the seller’s authority to sell.”

47 In my opinion, the section has no application in the present case because Clause 3 of the printed terms of sale in the contract between Oakhurst and LMC – in particular ROT-4 ­– expressly authorised Oakhurst to on-sell the goods and to pass the title in doing so.

48 Alternatively, Oakhurst was on-selling to GE with the knowledge and consent of LMC, as Mr Weber concedes. LMC knew that GE was a financier providing a floor plan arrangement. Although LMC does not concede that it knew that part of the floor plan arrangement would be that title to the Caravans would pass to GE when GE paid LMC at Oakhurst’s direction, I think that commercial people in the position of LMC would normally draw that inference. Accordingly, I am satisfied that LMC gave implicit consent to Oakhurst’s on-sales to GE, with the passing of title to GE.

Section 28(2) Sale of Goods Act

49 Section 28(2) provides:

“ Seller or buyer in possession after sale
…
(2) Where a person having bought or agreed to buy goods obtains with the consent of the seller possession of the goods or the documents of title to the goods, the delivery or transfer by that person or by a mercantile agent acting for that person of the goods or documents of title under any sale pledge or other disposition thereof to any person receiving the same in good faith and without notice of any lien or other right of the original seller in respect of the goods shall have the same effect as if the person making the delivery or transfer were a mercantile agent intrusted by the owner with the goods or documents of title.”

50 Mr Burton says that, within the application of this section, Oakhurst was a person who had agreed to buy goods from LMC and had obtained possession of the goods with the consent of LMC; Oakhurst delivered the goods to GE under a sale; GE received the goods in good faith and without notice of LMC’s retention of title rights; accordingly, title has passed under the section to GE.

51 In response, Mr Weber relies upon ROT-1 as a contractual term and also upon s 22 Sale of Goods Act, which provides:

“ Property passes when intended to pass

(1) Where there is a contract for the sale of specific or ascertained goods, the property in them is transferred to the buyer at such time as the parties to the contract intend it to be transferred.
(2) For the purpose of ascertaining the intention of the parties regard shall be had to the terms of the contract, the conduct of the parties, and the circumstances of the case.”

52 In my opinion, s 28(2) has no application in this case because ROT-4 expressly authorises on-sale by Oakhurst, with passing of title. If I am wrong in this conclusion, then the factual circumstances required by s 28(2) have been established by GE and the section operates to pass title to GE as against LMC.

53 Alternatively, the parties intended, by ROT-4, that title to the Caravans would pass to Oakhurst upon on-sale by Oakhurst, so that Oakhurst would be able to give good title to the purchaser. Accordingly, under s 22(1) Oakhurst obtained property in the Caravans immediately prior to on-selling to GE so that GE now has good title against LMC.

Equitable charge and restitution

54 Very little attention was paid to these points in the parties’ submissions – rightly so, because the case turns upon the construction of the contract between the parties, not upon points of law extraneous to the contract. I do not feel it necessary to deal with these submissions as they require no fact finding for the purposes of any appeal.

Orders

55 There will be a declaration that the Plaintiff has good title, as against the Third Defendant, to the goods itemised in Exhibit P3.

56 The Amended Cross Claim will be dismissed.

57 I will hear the parties as to costs.

– oOo –