General Motors Acceptance Corporation Australia & Anor v Southbank Traders Pty Ltd

[2006] HCATrans 538

[2006] HCATrans 538

IN THE HIGH COURT OF AUSTRALIA

Office of the Registry
  Melbourne  No M75 of 2006

B e t w e e n -

GENERAL MOTORS ACCEPTANCE CORPORATION AUSTRALIA

First Applicant

AUTO GROUP LIMITED (RECEIVERS AND MANAGERS APPOINTED) (ADMINISTRATORS APPOINTED)

Second Applicant

and

SOUTHBANK TRADERS PTY LTD

Respondent

Application for special leave to appeal

KIRBY J
HAYNE J

TRANSCRIPT OF PROCEEDINGS

AT MELBOURNE ON FRIDAY, 29 SEPTEMBER 2006, AT 12.53 PM

Copyright in the High Court of Australia

MR D.F. JACKSON, QC:   If the Court pleases, I appear with my learned friend, MR A.P. TRICHARDT, for the applicant.  (instructed by Corrs Chambers Westgarth)

MR W.T. HOUGHTON, QC:   If the Court pleases, I appear with my learned friend, MR G.J. AHERN, for the respondent.  (instructed by Browne & Co)

KIRBY J:   Yes, Mr Jackson.

MR JACKSON:   Your Honours, the critical issue in this case is whether, whatever might be the position under the general law, the vendor, under a retention of title type clause in the sale of goods has a security interest in terms of the Chattel Securities Act 1987 (Vic). The manner of resolution of that issue, in our submission, is of some significance in ordinary commercial trading and the issue is of significance for a number of reasons and may I come to them in just a moment. May I go to the reasons of the Court of Appeal and to very much an outline of the argument in relation to the matter.

KIRBY J:   Is it put against you that this is rather special legislation of the State of Victoria and I realise that that does not disqualify it from the consideration by this Court but it does take away something of the impetus behind your sales that you would otherwise have if this were a common national question as the last application raised.

MR JACKSON:   It is the same in Western Australia, your Honour.  The legislation appears to be, relevantly - I leave aside a few, converting “two” to “2” and things of that kind - the same in Western Australia.  There are differences in other States.  Whether they are ultimately material may be a different question but certainly the legislation in those two States is the same.  So, your Honours, it is not just a matter that affects Victoria.

If I could take your Honours to the relevant provisions of the Chattel Securities Act, your Honours will see that it provides in section 7(1):

if a secured party has –

which is a term defined by section 3(1) and I will come back to that in a moment, your Honours, but defined to mean, relevantly, “the holder of a security interest” –

an unregistered security interest . . . 

but is not in possession of the goods and a purchaser purchases or purports to purchase an interest in the goods . . . for value in good faith and without notice . . . from a supplier being‑

(c)      the debtor –

then what follows from that is that -

the security interest of the secured party is extinguished.

Your Honours, all that turns on there having been the holder of a “security interest” and that term is defined by section 3(1) as meaning:

an interest in or a power over goods . . . which secures payment of a debt or other pecuniary obligation or the performance of any other obligation and includes any interest in or power over goods of a lessor, owner or other supplier of goods –

Now, as the definition makes clear in the last few lines, “security interest” –

includes any interest in or power over goods of a . . . supplier of goods -

Your Honours, I leave aside the words “lessor” and “owner” because they are defined in a way which is not relevant for present purposes.  So one looks at the term “supplier”.  Your Honours will see that the term “supply” immediately underneath it:

means dispose of an interest in the goods by way of sale, exchange, lease or hire‑purchase –

There is in the present case a simple and common situation.  The respondent, in our submission is, in terms of the Act, a supplier of goods.  It disposes of an interest in goods by way of sale.  That attracts section 3(3) which says that:

For the purposes of this Act, a hirer –

I will leave out the unnecessary words -

a buyer of goods under a conditional sale is deemed to have an interest in the goods notwithstanding that title or general property in the goods has not passed to the . . . buyer.

The first respondent as a buyer of goods under a conditional sale is deemed to have an interest in the goods by section 3(3) “notwithstanding” - and I refer to the concluding words of that provision – that it does not have “title or general property in the goods”.

Your Honours, the terms of section 3(3) cut across the operation of the retention of title provision in this way.  What it does do is to mean that there is no longer simply one interest in the goods but there are two interests in the goods, namely, (a) that of the buyer and (b), that of the seller.  The seller no longer holds the only interest in the goods and the interests of the unpaid seller/vendor is, to use the words of the definition of “security interest” if I could go back to that in section 3(1):

an interest in or a power over goods . . . which secures payment of a debt –

and also it is an:

interest in or power over goods of a . . . supplier of goods ‑ ‑ ‑

HAYNE J:   What is the interest or power that the unpaid vendor has?

MR JACKSON:   The unpaid vendor, your Honour, has the power to take the goods back.  It has the power to say “title in them is not to go until I am paid”.  That puts it very shortly but that is essentially what it is.  Your Honours will see that referred to more fully in the judgments…..  So it is the ability of the unpaid vendor to prevent title passing until they are paid and to prevent, if it so chooses, there being delivery to a potential purchaser from the person, the motor trader in this case.

HAYNE J:   Where do I find that power in the unpaid vendor?  Is it in the terms of the retention clause?

MR JACKSON:   Yes, your Honour.

HAYNE J:   Where do I most conveniently find it?

MR JACKSON:   Your Honour will see that set out at page 4 of the application book in paragraph 8 of the primary judge’s reasons.  You will see first of all paragraph (1) in the quotation:

Property . . . shall not pass to the purchaser until –

full payment for that and other vehicles and then your Honours will see the qualifications in paragraphs (2), (3) and (4).

HAYNE J:   The power to recover is (2)(d).

MR JACKSON:   Yes, your Honour.  The point we seek to make about it is that at the very least, section 3(3) has the effect that there are two interests in it.  Your Honours, if I could move on from that.  In the Court of Appeal’s reasons, in our submission ‑ ‑ ‑

KIRBY J:   Mr Jackson, we are inclined to call on Mr Houghton at this point but is there anything you would like to say about the issues that are raised by the notice of contention.  Might you win on this issue but lose in the ultimate because of the matters raised in the contention?

MR JACKSON:   Your Honour, we might ultimately lose on them – that is a possibility – but what has happened in the case, as your Honours will have seen, is that this issue was one selected by the Court of Appeal as being one on which the Court of Appeal decided.  The Court of Appeal decided against us on the “good faith” and “value” issue, not deciding it finally at all but simply saying that that issue is one which should be dealt with.

KIRBY J:   So that the matter in the contention would not normally be dealt with by this Court but would be sent back to the Court of Appeal and that is what you would be urging us to do in the event that you succeeded.

MR JACKSON:   Your Honour, what our written submissions say is that we accept that apart from this issue, if we succeed – I am sorry.  If we succeed on this issue the case must go back to be further determined.  We accept that.

KIRBY J:   Yes.

MR JACKSON:   We do not ask this Court to deal with any issue other than this issue.

KIRBY J:   No, that would be a very uncongenial request.  Thank you, Mr Jackson.  Yes, Mr Houghton.

MR HOUGHTON:   If the Court pleases.  We would put forward three reasons as to why this case is not a suitable special leave case.  The first reason is that in 2000 this Court had occasion to undertake a detailed examination and analysis of a reservation of title clause which was perhaps in more complex terms than this one and that was the case of Associated Alloys.  In that case the majority made the point that reservation of title clauses have existed now for quite a long time.  They are supported by statutory provisions in the Sale of Goods Act, which again have been around for even longer a time and the Court by majority approved the basic commercial authorities of the House of Lords back in 1895, such cases being Helby v Matthews and another one in the same volume.

Those cases both stood for the proposition that what the courts will look at in transactions of commercial law are the form of the agreements rather than the substance of the agreements.  What the Court said as recently as 2000 was that the attempt to overcome the retention of title clause in Associated Alloys really was an attempt to persuade this Court to rewrite the statute.

Now, if our learned friends are right on their point that the conditional sale which took place in this case is caught by the interest of “security interest” and is therefore regulated by the registration provisions of this Act, essentially what our learned friends are asking this Court to do is the same as what the appellant was seeking in the Associated Alloys Case in order to make good that point ‑ ‑ ‑

HAYNE J:   Why?

MR HOUGHTON:   Why?  Because the latter parts of the definition relied upon by our learned friend today, namely, “other supplier of goods” is inapt, as was found by the Court of Appeal, because a vendor under a conditional sale of goods is not the supplier of goods as defined in this Act.  It disposes of nothing unless and until the condition to which the sale is subject is fulfilled – in this case payment.  Now, “supply” is defined immediately after the definition of “security interest” as was noted in the Court of Appeal and it means to:

dispose of an interest in the goods by way of sale –

If the legislature had intended to catch conditional sales, which is essentially the proposition of the applicant today, it would have said so because no interest is disposed of by way of a conditional sale unless and until the condition, ie, “payment”, is fulfilled.  Title always remains with the vendor.  If the legislature had intended this Act to apply to conditional sales it could have said so by adding, for instance, the words after “by way of sale” they would add the words “by way of conditional sale”.  Similarly, this Court would need to rewrite this Act in other definitions.

HAYNE J:   If that argument is good it is an argument about the word “interest”, is it not?

MR HOUGHTON:   Yes.

HAYNE J:   What is the interest that is disposed of in a hire purchase?

MR HOUGHTON:   Nothing is disposed of by way of a hire‑purchase agreement because property always remains with the owner and there is an option to purchase at the end of the term, granted to the hirer.  So no interest is disposed of.

HAYNE J:   How then does the definition work in the case of “lease or hire purchase”?

MR HOUGHTON:   Precisely.  That is precisely our point.  It only works because this piece of legislation deals with it in a fictional or statutory manner.  It would not be caught – the position of a lessor and a lessee of a chattel and an owner and a hirer under a hire‑purchase agreement would not be caught by this Act unless the legislature has seen fit to deal with them specifically.  Your Honours will see in the definition of “security interest” that the position of “goods of a lessor” and goods of an “owner” are dealt with specifically in the definition.

An “owner” is defined as being an owner within the meaning of the Hire‑Purchase Act and the “lessor” is also defined as being “the person who hires the goods to another person” and so on.  So the only way that an “interest” of a hirer under a Hire‑Purchase Act is dealt with is because the legislature has deemed fit to include it in the definitional section.  Therefore it follows that the interests of a lessor, vis-à-vis a lessee, and the interests of an owner, vis-à-vis a hirer under a hire‑purchase agreement, are dealt with.  It is a deemed statutory fiction to give those persons an interest but, in our submission, the Act does not go as far as to extend the system of registration interest to vendors and purchasers under conditional sales. 

Now, the reasons for that were set out compendiously in the Court of Appeal by looking at, for instance, the predecessor to this Act, the 1981 Act, which did not even mention a conditional sale anywhere but did divide up interests at common law or under sale of goods type provisions, interests of lessors and lessees under lease contracts and interests of hirers and owners under hire‑purchase contracts in three separate sections, that is 8, 9 and 10, and made those interests registrable under section 16.

KIRBY J:   We have read all that and you may well succeed.  You have the Court of Appeal on your side and you have good arguments on your side but this is a ruling which (a), affects very many transactions and the transactions of ordinary people and, (b) appears counter‑intuitive in its consequences and therefore is it not something that this Court would look at given its significance in Victoria and, we are told, Western Australia.

MR HOUGHTON:   We answer it in this way, your Honour.  It affects only a limited number of transactions.  My client is a wholesaler in the motor car trade and the applicant is a financier.  The fight is over who gets the proceeds of motor vehicles when the retail dealer becomes insolvent.  It is your typical priorities dispute in a securities context.  The reason we say it does not raise a point of general importance is because it is confined to the facts of the particular sort of transaction.  Motor car dealers in the wholesale trade, auctioneers take in vehicles from the trade and they dispose of vehicles at auction to the trade.  So these retention of title clauses which my client avails itself of are between a wholesaler, on the one part, and a retailer of motor vehicles, a dealer in motor vehicles, on the other part.

Your Honour will note the express terms of this retention of title clause enabled that dealer, notwithstanding that he has not yet paid the purchase price and not yet taken title, still enables that dealer to pass a good title to a consumer in the ordinary course of business, bona fide and for value.  That is part of the retention of title clause.  So the consumer is totally unaffected by the outcome of this litigation.  It affects those in the wholesale industry.  It affects, arguably, those in the retail industry.  It affects those who finance transactions in either the retail or wholesale industry.  It does not affect consumers.

The point we make that this is not an appropriate vehicle is that essentially this Act was a package in company with the Credit Act 1984, as it became, to regulate and reform financing transactions at the consumer level.  In other words, the vice or mischief which this Act is designed to overcome, or one of them, is the knock on the door in the middle of the night by the representative of the finance company on the door of a purchaser two or three down the line saying, “You haven’t got title to this motor car.  It’s still ours.  We want it back.”

That vice is overcome by the legislature in this Act setting up a register – the Chattel Securities Register – whereby those who truly have a security interest, in other words an interest of a financier who has financed a motor vehicle or a motor boat or some other chattel of that nature, a purchaser can search the register and see whether there is a security interest there.  If they search the register and no security interest is there they can buy unaffected by any unregistered security interest or unaffected by any error in the register because there is a system of compensation set up for those who register a security interest but by error it is not in fact registered.

KIRBY J:   This is not the same point as you raise in the notice of contention.

MR HOUGHTON:   No, that is a different point.  The notice of contention goes to the facts of the – if it is a security interest, if they are right on that - we say of course they are not – then, in any event, they are more or less doomed to failure because on the facts really they were put on inquiry as to the existence of a security interest that we held if we held one.  So we say it is not really an appropriate vehicle in the sense it does not really affect ‑ ‑ ‑

KIRBY J:   You have heard Mr Jackson say he would be asking for this Court to remit that matter in contention to the Court of Appeal if he were successful in the appeal.

MR HOUGHTON:   I think he is asking for a retrial on about three separate points, not just to the Court of Appeal.  It would have to go back to a judge at first instance for a retrial on three separate and ‑ ‑ ‑

KIRBY J:   That may be so but would you wish to say anything against that course in the event that the applicant were allowed special leave and succeeded in the appeal?

MR HOUGHTON:   No.  So on the first point, your Honours, we would submit the Court of Appeal were quite correct in its construction of security interest.  It really requires this Court to rewrite the statute to add words to the definition, for instance, of “supply”; the definition, for instance, of “debtor” and so on.  The second point, it is not an appropriate vehicle because it does not affect a large number of transactions, particularly at the consumer level which is what this Act is designed to remedy.

HAYNE J:   Can it affect transactions at the consumer level, Mr Houghton?

MR HOUGHTON:   No.  It is difficult to see how it could for this reason.  Wholesalers dispose of vehicles to retail dealers.  Dealers dispose of vehicles to consumers.  Consumers have the benefit of searching the register to see whether any financier has any security interest.  So a decision on this point would not affect the usual sort of transaction between wholesaler, retailer and consumer.

Secondly, the reservation of title clause here, as is the case with many others, allows the dealer or the retailer in possession to pass good title to the consumer such that there is not going to be the knock on the door in the middle of the night by someone years later or months later asserting a better title.  For those reasons, your Honours, we say that special leave ought not be granted.  But the final point, the third point, which is one that your Honour the learned presiding Judge has already made, the legislation is not uniform.  The only similarity is that with Western Australia.  Other States and Territories have quite different definitions in any ‑ ‑ ‑

KIRBY J:   Just as well for you Justice Callinan is not here.  If you had said that to him he takes the view we are the Supreme Court of Australia and we are concerned with the law of Victoria and he is right.

MR HOUGHTON:   The intermediate Court of Appeal in this State has laid down the law for this State.  If the Court pleases.

KIRBY J:   Yes, thank you.  Subject to special leave by this Court.

MR HOUGHTON:   Yes.

KIRBY J:   Yes, Mr Jackson.

MR JACKSON:   Your Honours, our learned friend said you do not see conditional sale.  The whole purpose, one would think, of the terms of section 3(3) of the Act where it does specifically mention “conditional sale”, which is the very type of thing with which this case is concerned, is to bring conditional sales under the operation of the Act.  Your Honours, when one sees the term “conditional sale” in a context where you will see:

a buyer of goods under a conditional sale is given an interest –

and where you see, also, a definition of “supply” which means:

dispose of an interest in the goods by way of sale –

it is rather giving a curious interpretation to the Act, in our submission, to say it can have no operation in relation to transactions of this kind.

I referred a moment ago to section 3(3).  What one has to bear in mind is that that is the provision in relation to which the Court of Appeal said it was effectively meaningless.  May I take your Honours to where that was held.  That appears at page 56 of the application book.  It commences at paragraph 85 of the Court of Appeal’s reasons.  It is said after referring to section 3(3) it is said in paragraph 86 this is “a mystery”.  That is discussed then over a number of paragraphs until one gets to paragraph 96 and then it is said:

In our view, whatever s.3(3) was intended to achieve, the subsection does not operate to achieve what the express definitions fail to achieve –

Your Honours, it is really, with respect, quite a very odd conclusion to arrive at to say that a provision that deals with conditional sales, a provision that says, in effect, no longer in the case of a conditional sale does the vendor have the only interest is one that has for practical purposes no effect.  Then our learned friend’s argument says you treat “supply”, when one is speaking in terms of “supply” in the definition of that term and as used in “supply” in the definition of “security interest”, it is said that that is – as a conditional sale is not to dispose of an interest in the goods by way of sale

because the actual disposition has not taken place until the purchase price is paid.

Your Honours, all those matters, in our submission, rather lead one to the view that it is unlikely that the legislature intended that effect to be the interpretation of the Act and it is not quite right, with respect, to say this only – and perhaps one tends to look at it from the point of view of the kind of work one’s client engages in, that there is no reason – I will start that again.  Your Honours, one does have a situation where what is said by the other side is this is not a security, because we use the retention of title clause it is not a security interest.  So the result is if you buy it later then there is the possibility of the knock on the door by someone in the position of the person who has the interest that our learned friends have.

Your Honours, it is not just a case of saying it is not just the big suppliers who do it, it is also by no means uncommon for ordinary people to enter into transactions for sale of cars or other goods where they say, “It’s not yours until you pay the money.  You can drive it but it is not yours until you pay the money.”  Of course, then it is on sold and so it goes. 

Your Honours, in our submission the case is one that is of importance.  It is of relatively general application and there was a fair argument, we would submit, that the decision of the Court of Appeal was erroneous.

KIRBY J:   There will be a grant of special leave in this matter.  Is it agreed that the matter would be no more than a one‑day case?

MR JACKSON:   Your Honour, that would be my view.

KIRBY J:   Do you agree with that, Mr Houghton?

MR HOUGHTON:   Yes, your Honours.

KIRBY J:   Yes, very well.

The Court will now adjourn in order to reconstitute for the next succeeding application.

AT 1.21 PM THE MATTER WAS CONCLUDED