Jiao Chen v SellYourCarFast Pty Ltd

[2016] NSWDC 28

District Court

New South Wales

• Amendment notes

Medium Neutral Citation:

Jiao Chen v SellYourCarFast Pty Ltd [2016] NSWDC 28

Hearing dates:

3 March 2016

Date of orders:

18 March 2016

Decision date:

18 March 2016

Jurisdiction:

Civil

Before:

Hatzistergos DCJ

Decision:

(1)   Verdict for the Defendant;

 

(2)   The Plaintiff is to pay the Defendant’s costs; and

 (3)   Exhibits to be retained for 28 days.

Catchwords:

CONTRACT – SALE OF GOODS – fraud – sale of car to rogue – exceptions to nemo dat quod non habet – whether third party a bona fide purchaser for value without notice – whether sale was void or voidable –– buyer in possession after sale

Legislation Cited:

Civil Procedure Act 2005 (NSW) s 93(1)(a)
Evidence Act 1995 (NSW) s 140(2)(c)
Sale of Goods Act 1923 (NSW) ss 22, 26(1), 28(2) Factors (Mercantile Agents) Act 1923 (NSW) s 5

Cases Cited:

Associated Midland Corp v Sanderson Motors Pty Ltd [1983] 3 NSWLR 395
Briginshaw v Briginshaw (1938) 60 CLR 336
Davey v Robinson’s Motors Pty Ltd (1958) 75 WN (NSW) 56
Detective Senior Constable Wilkes v Abou-Yaghi [2012] NSWDC 6
Gamer’s Motor Centre (Newcastle) Pty Ltd v Natwest Wholesale Australia Pty Ltd (1987) 163 CLR 236
Godfrey v Sevenoaks (1958) 75 WN (NSW) 487
Heap v Motorists’ Advisory Agency Ltd [1923] 1 KB 577
Ingram v Little [1961] 1 QB 31
Jinhang and Peiyan Pan v Commissioner for Police; Anthony Eddy v State of New South Wales Police; TQ Heavy Transport Pty Ltd (Mr Quang) v Commissioner for Police and Peiyan Pan (Unreported, District Court of New South Wales, Sorby DCJ, 27 November 2013)
Kingaroy Mall Pty Ltd v E & N Collins Enterprise Pty Ltd & Ors [2008] QSC 66
McEntire and Maconchy v Crossley Brothers Ltd (1895) AC 457
Moorgate Mercantile Co Limited v Twitchings [1977] AC 890
Neat Holdings Pty Ltd v Karajan Holdings Pty Ltd (1992) 110 ALR 449
Southdown Publications Pty Ltd v ACP Magazines Pty Ltd (2003) 60 IPR 367
Thomas Australia Wholesale Vehicle Trading Co Pty Ltd v Marac Finance Australia Ltd (1985) 3 NSWLR 452
Vassallo v Haddad Import and Export Pty Ltd (2004) DCLR (NSW) 123

Category:

Principal judgment

Parties:

Ms Jiao Chen (Plaintiff)
SellYourCarFast Pty Ltd (Defendant)

Representation:

Counsel:
Mr D P O’Connor (Plaintiff)
Mr D Parish (Defendant)

  Solicitors:
Turks Legal (Plaintiff)
Sofra Solicitors (Defendant)

File Number(s):

2015/94327

Publication restriction:

Nil

Judgment

1. The Plaintiff brings proceedings against the Defendant seeking an order pursuant to section 93(1)(a) of the Civil Procedure Act 2005 (NSW) [1] in relation to the delivery to the Plaintiff of:-

1. One white BMW X5 – XDRIVE30D four wheel drive vehicle bearing vehicle identification number (“VIN”): WBAKS0X00G60764; [2]

2. Two keys for the BMW; and

3. One logbook for the BMW.

   1. Hereinafter referred to as the “2005 Act”

   2. Hereinafter referred to as “the vehicle” or the “car”

2. The circumstances that gave rise to the action are by in large not in dispute. On 5 March 2013, the Plaintiff bought a new car from BMW Sydney for the sum of $124,500. [3] In January 2014, the Plaintiff changed the number plate on the vehicle from CPX 89J to SNOWWY. In February 2014, the Plaintiff decided that she wanted to sell the car as she did not like the smell of diesel car fumes being emitted. Her evidence was that the vehicle was also big which made her feel dizzy when driving it around. [4]

   3. Affidavit of Ms Jiao Chen dated 20 July 2015 at [3] – [6]

   4. Affidavit of Ms Jiao Chen dated 20 July 2015 at [8]

3. On or around 5 March 2014, the Plaintiff asked her friend Mr Ziyang ‘Alex’ Ou to place an advertisement on Alex proceeded to place an advertisement with the sale price of $120,000. [5]

   5. Affidavit of Ms Jiao Chen dated 20 July 2015 at [10] – [11]

4. According to Mr Ziyang Ou, he was contacted on 8 March 2014 from a person who spoke Mandarin and was prepared to pay $121,000 - an amount slightly above the asking price so as to make sure he didn’t lose the vehicle. Mr Ziyang Ou advised that the vehicle was not his but he was assisting in helping the Plaintiff sell her vehicle. He offered to discuss the offer with her as soon as possible. Subsequently, Mr Ziyang Ou contacted the Plaintiff informing her of the contents of the conversation that he had with the prospective buyer. [6]

   6. See the Affidavit of Mr Ziyang Ou dated 16 July 2015 at [12]

5. Shortly after the conversation between the Plaintiff and Mr Ziyang Ou, the latter was contacted again by the prospective purchaser and arrangements were made for them to meet at the RTA in Macquarie Shopping Centre. [7] It was indicated at that time that the prospective purchaser proposed to pay $1000 in cash and then subsequently a cheque for $121,000 whereupon the cash would be handed back. The prospective purchaser asked if he could bring a friend and Mr Ou agreed. [8]

   7. Although Mr Ziyang Ou referred to the RTA (Roads & Traffic Authority), it is clear that he was in fact referring to the RMS (Roads and Maritime Services). See the Affidavit of Mr Ziyang Ou dated 16 July 2015 at [12] – [15]

   8. See the Affidavit of Mr Ziyang Ou dated 16 July 2015 at [13]

6. On 13 March 2014, the Plaintiff and Mr Ou proceeded to the RMS branch at the Macquarie Shopping Centre and met two males of Asian appearance. One was taller and the other was noticeable shorter. [9] Mr Ou arranged the removal of the SNOWWY number plates and the Plaintiff proceeded to complete a form to exchange the registration of the vehicle for a new NSW number plate (BY 27 CL) to be issued together with a new certificate of registration. [10] The Plaintiff proceeded to go into the RMS branch for the purpose of exchanging her personalised number plates to new plates. A conversation is then said to have taken place with one of the two persons regarding paying a deposit once the plates were changed over. According to Ms Chen, the taller male informed her that the shorter one wished to buy the car and proposed that he would give $1000 cash and then pick it up in a week’s time. It was confirmed that he was to pay $121,000 in a bank cheque, at which time the $1000 cash would be repaid.

   9. See the Affidavit of Mr Ziyang Ou dated 16 July 2015 at [15] and the Affidavit of Ms Jiao Chen dated 20 July 2015 at [16] – [17]

   10. Affidavit of Ms Jiao Chen dated 20 July 2015 at [24]

7. Thereafter the Plaintiff was handed $1000 cash in Australian currency. The shorter male asked her to write a paper note in Chinese which the Plaintiff apparently signed. After handing the written note to the short male, the Plaintiff had a conversation with him in which the latter requested to be able to take a photo of her driver’s licence as he had just handed her the money. The Plaintiff agreed. The Plaintiff handed over her driver’s licence and the short male then took a photo of it with his phone and handed it back to her. [11]

   11. Affidavit of Ms Jiao Chen dated 20 July 2015 at [27]

8. On 20 March 2014, the prospective purchasers met both the Plaintiff and Mr Ou at Ms Chen’s parent’s house in order for the sale to take place. [12] It is not in issue that the shorter male handed the Plaintiff an ANZ bank cheque for the sum of $121,000 bearing cheque number: 233687 013080 6501675 being in respect of the full purchase price as agreed. The Plaintiff returned the sum of $1000 cash to the shorter male. She then walked over to the vehicle which was parked on the street outside her parent’s house and pointed to the passenger’s seat on which there sat the registration certificate and the spare keys. She had completed the paperwork before they arrived and had a conversation with the taller male in which she pointed out the location of the transfer papers and the keys. She asked the shorter male whether he wished her to complete the buyer’s details on the transfer papers. The shorter male indicated that he intended to purchase under the name of his uncle’s company and that it was unnecessary. [13]

   12. See the Affidavit of Ms Jiao Chen dated 20 July 2015 at [29] and the Affidavit of Mr Ziyang Ou dated 16 July 2015 at [26] – [27].

   13. See the Affidavit of Ms Jiao Chen dated 20 July 2015 at [34]

9. The Plaintiff then handed over the ignition key to the shorter male and around this time Mr Ou was having a conversation with the taller male. The shorter male got into the driver’s door and the taller male into the front passenger’s seat and they proceeded to drive away. It appears that both the Plaintiff and Mr Ou thought that the purchasers would take the vehicle for a test drive and then return to confirm whether they would take the vehicle. However after 30 minutes Ms Chen noticed that they had still not returned and reasoned that they were happy with their purchase and did not see it necessary to return given that they had everything that they needed. [14]

   14. See the Affidavit of Ms Jiao Chen dated 20 July 2015 at [39]

10. The Plaintiff’s evidence was that she did not suspect that anything was unusual as she was in receipt of the ANZ bank cheque. [15] It appears that later that day Mr Keith Fernandez from the Defendant in Abbotsford, Victoria was contacted by someone wanting to sell the vehicle. [16] Mr Fernandez directed that the car be taken to European Motori for an inspection and a picture should be sent via SMS of the certificate of registration so that he could complete the Personal Property and Securities Register [17] search. This appears to have been done and a certificate obtained dated 21 March 2014. [18]

    15. Affidavit of Ms Jiao Chen dated 20 July 2015 at [39]

    16. Affidavit of Mr Keith Fernandez dated 15 October 2015 at [15]

    17. Hereinafter referred to as “PPSR”

    18. Affidavit of Mr Keith Fernandez dated 15 October 2015 at Exhibit KF 2.

11. The Defendant did not have any affiliation with European Motori or Scudria Graziani. The evidence of Mr Fernandez was that these companies had a good commercial relationship. [19]

    19. Affidavit of Mr Keith Fernandez dated 15 October 2015 at [18]

12. Mr Najib “Jim” Nehme was an employee of Tenjay Pty Ltd trading as European Motori. His task was to purchase motor vehicles for the company and he had been working for the company for two and a half years. His affidavit of 16 October 2015 disclosed that he had 8 years’ experience buying and selling motor vehicles. His evidence that Tenjay Pty Ltd trading as European Motori was affiliated with Italia Motori Pty Ltd trading as Scuderia Graziani with the former specialising in the purchase of prestige motor vehicles from the public and other vehicle wholesalers, and Scuderia Graziani specialised in the sale of those vehicles. According to Mr Nehme’s evidence he had a commercial relationship Dutton’s Garage Wholesalers Pty Ltd trading as CarSellersAustralia and SellYourCarFast Pty Ltd.

13. Mr Nehme’s evidence was that on 21 March 2014 he received a call from Mr Gavin Fernandez advising that a white BMW X5 was going to Mona Vale for inspection at Scurderia Graziani. He requested that the vehicle be inspected and enquired as to whether or not European Motori would like to purchase it. Mr Nehme agreed with Gavin Fernandez that if the vehicle passed inspection European Motori would purchase the vehicle from one of the wholesale arms of Dutton’s Garage Group. As Mr Nehme was unable to inspect the vehicle that morning he asked Ms Silvia Giannoulis to inspect the vehicle.

14. Ms Silvana Giannoulis was employed as the operations manager for Italia Motori Pty Ltd trading as Scurderia Graziani and worked for the company for approximately 5 years as at 15 October 2015. She did however have 30 years’ experience in buying and selling motor vehicles. Her evidence was that Scurderia Graziani specialised in both the buying and selling of prestige motor vehicles. Her evidence was that Tenjay Pty Ltd trading as European Motori was an affiliated company which also purchased prestige vehicles direct from the public and from wholesale dealerships throughout the country.

15. Ms Giannoulis stated that when inspecting a vehicle her standard practice was to confirm a combination of: (a) if applicable, confirm the receipt or bill of sale; (b) the certificate of registration; (c) the make, model, colour, year from the description verbally given by the seller/s and/or dealer; (d) examine the general condition/presentation of the vehicle; (e) note the mileage; (f) examine the registration papers and driver’s licence of the owner; and (g) compare the VIN to the registration papers. [20] Ms Giannoulis’ evidence was that unless specifically requested, she would not value the vehicle but would take a copy of the registration paper and the drivers’ licences and send them via facsimile to the dealership in question before telephoning the dealership to confirm the outcome. She stated that on the 21 March 2014 she received a telephone call from Mr Nehme advising that he had received a request from the Defendant to carry out an inspection of the BMW that morning. She further gave evidence that on the same morning at 9:00 am, two males of Asian appearance entered into Scurderia Graziani showroom with the BMW. [21] Ms Giannoulis carried out the inspection reviewing the motor vehicle registration papers, driver’s licence, the VIN and examining the general condition and presentation of the vehicle.

    20. Affidavit of Ms Silvana Giannoulis dated 15 October 2015 at [7]

    21. Affidavit of Ms Silvana Giannoulis dated 15 October 2015 at [10] – [11]

16. Ms Giannoulis’ evidence was that the first male (who she described as having a medium build) did most of the talking and presented a driver’s licence in the name of the Plaintiff which had a photograph of the Asian male she was speaking to. [22] He also provided the registration/transfer papers for the BMW in question which were in the name of the Plaintiff. Ms Giannoulis handed the driver’s licence and registration papers to the receptionist who then copied and faxed them to the Defendant at approximately 11:05 am. Her evidence was:-

“The driver’s licence and registration papers appeared to me to be legitimate and there was nothing on inspection of the documents that would lead me to suspect that they were not valid.” [23]

22. Affidavit of Ms Silvana Giannoulis dated 15 October 2015 at [14]

23. Affidavit of Ms Silvana Giannoulis dated 15 October 2015 at [16]

17. Ms Giannoulis then gave evidence that she telephoned Mr Nehme and advised him that the inspection had been completed and that everything appeared to be in order and that was the end of her involvement. At some point, it was agreed that European Motori would purchase the vehicle for $106,000. Tax Invoice No 00000514 was issued to European Motori. [24] The vehicle was registered in the name of “Italia Motori Pty Ltd” on 24 March 2014. On 24 March 2014, it was sold to a private customer – Mr Dimitri Marvos.

    24. Affidavit of Mr Najib Nehme dated 16 October 2015 at JN 1

18. On or around 21 March 2014, the Plaintiff deposited the cheque at the St George Bank in Eastwood. [25] On 31 March 2014 she attended the St George Bank Eastwood branch and asked the teller to make inquiries about the ANZ bank cheque as it was not showing in her account. The teller made inquiries and then informed the Plaintiff that the bank cheque she had been provided with had been acquired by through a personal cheque and as the personal cheque had been dishonoured, the cheque was cancelled. [26]

    25. Affidavit of Ms Jiao Chen dated 20 July 2015 at [40]

    26. Affidavit of Ms Jiao Chen dated 20 July 2015 at [45]

19. However on 1 April 2014 the Plaintiff received a letter from her bank dated the 25 March 2014 advising that they were unable to deposit the cheque in her account as it was “counterfeit.” [27] The Plaintiff thereafter attended the Eastwood Police Station on 31 March 2014 to report her vehicle stolen. The Police informed Ms Chen that they could see that the vehicle was noted as being at Italia Motori Pty Ltd and suggested that she should locate the car and then “lodge a caveat on the car to prevent further sales.” [28]

    27. See Affidavit of Ms Jiao Chen dated 20 July 2015 at Annexure H

    28. See Affidavit of Ms Jiao Chen dated 20 July 2015 at [50] – [51]

20. On 31 March 2014, the Plaintiff wrote to Scurderia Graziani advising that the vehicle that they had received was stolen. On 1 April 2014, Mr Nehme had notified the Defendant attaching the letter that Ms Chen wrote to Scurderia Graziani on 31 March 2014. According to the Plaintiff, Mr Fernandez introduced himself as the car dealer to whom a young Chinese man had sold the car using the driver’s licence with her name. Mr Fernandez claims that he asked the Plaintiff: “if your car was stolen, how did the seller get your licence and registration?” Ms Chen is said to have replied: “I handed them over to them.” [29]

    29. Affidavit of Mr Keith Fernandez dated 15 October 2015 at [25](b)

21. Following a phone call from Detective Alexander Moffat of NSW Police on or around 28 May 2014, Mr Nehme contacted Mr Marvos and informed him what had occurred, and advised him that the purchase price would be refunded and a suitable replacement would be sold to him. Mr Nehme’s evidence was that a suitable replacement vehicle was found, the sale was rescinded and the original number plate “BY 27 CL” was replaced on the vehicle. On 20 June 2015, Mr Nehme said he was contacted by the Defendant and informed that given the longstanding commercial relationship the agreement between them would be rescinded and the purchase price of $106,000 paid by European Motori would be refunded in full. [30]

    30. Affidavit of Mr Najib Nehme dated 16 October 2015 at [24]

22. Mr Nehme gave evidence that arrangements were made to deliver the vehicle to the Defendant but he was not actively involved in the process and was not sure whether the car was in fact collected.

23. According to Detective Moffat he contacted Mr Keith Fernandez of the Defendant on 25 June 2014 and informed him that he proposed to surrender the vehicle to police and that the matter had been taken over by his “boss” named “George” who would be looking after things from now on. [31] After a series of attempts, Detective Moffat contacted “George” who informed him that the vehicle would not be surrendered to the Police. Subsequently correspondence was received from the Defendant’s solicitor – Mr Ric Sofra, who wrote to Detective Moffat on behalf of the Defendant advising that he endeavoured to make contact with the solicitors for the Plaintiff and was waiting for a call from them. He informed the detective that he firmly believed that the matter was a civil one and should be resolved between his client and “Allianz.” [32]

    31. Affidavit of Mr Alexander Moffat dated 17 July 2015 at [59]

    32. See Affidavit of Mr Alexander Moffat dated 17 July 2015, Exhibit AJM – 1 at pp 114 – 116.

24. It is not in issue that the Defendant deposited the sum of $98,000 into the account of “Ke Xiong” with the Commonwealth Bank at Carlingford, NSW on 21 March 2014. [33] . On the same day, the said sum was withdrawn in four cash withdrawals at various branches of the bank as disclosed in the list of transactions from the said bank’s documents. It appears not in issue between the parties that fraud was perpetrated on the Plaintiff by the two males. It appears that when the Plaintiff allowed a photo of her driver’s licence to be taken a false licence was able to be procured in the Plaintiff’s name which together with the incomplete car registration form enabled them to effect the transfer to the Defendant.

    33. See Affidavit of Mr Alexander Moffat dated 17 July 2015, Exhibit AJM – 1 at p 64.

25. A person by the name of Ke Xiong has since left Australia [34] . Another person named Xudong Zhu has been charged in relation to the matter and remains before the Local Court. [35]

    34. Affidavit of Mr Thomas Barbat dated 17 February 2016 at [5]

    35. Ibid

Plaintiff’s Case

26. The Plaintiff’s case is that there is only one issue for determination, and that is whether title passed from the Plaintiff to the purchasers such as to allow them to pass title on to the Defendant. It contends that following the decisions in Davey v Robinson’s Motors Pty Ltd [36] and Godfrey v Sevenoaks [37] that it should be accepted that the sale of the car from the Plaintiff to the purchaser was contingent on the clearance of the bank cheque and the clearance having not occured the contract was void and title did not pass.

    36. (1958) 75 WN (NSW) 56

    37. (1958) 75 WN (NSW) 487

26. In Daley v Robinson’s Motors Pty Ltd, the Full Supreme Court of NSW considered an appeal in circumstances where the owner of the motor car advertised for sale as a result of which he was approached a person Allen who wished to buy the car at an agreed price. Allen promised to give the Plaintiff a post-dated cheque in payment of the price. He then obtained possession, decamped and sold the car to the Defendant, a third party who made no inquiries as to title until after the purchase from Allan had been concluded. The Plaintiff sued the Defendant for damages for conversion and the trial judge concluded that the Plaintiff had agreed with Allen, that Allen should have the car at his disposal for certain purposes but that no property in the car would pass until the post-dated cheque had been met. The question for the Full Court was whether in the circumstances, the Plaintiff had intended to pass property to Allen, enabling him to dispose of the car as his own or merely the pass possession of the car.

27. This required consideration of what was the intention of the parties bearing in mind that despite the owner’s intention that property should not pass until the post-dated cheque had been met, he allowed Allen to have the car at his disposal to enable him to dispose of the car to another buyer. Once Allen received the purchase money, he could then pay the amount which was owing to the Plaintiff on the post-dated cheque.

28. The trial judge held that the fact that the owner had kept the registration certificate indicated that he must have thought that the retention of it prevented title from passing. Street CJ quoted with approval, the speech of Lord Herschell L.C. in McEntire and Maconchy v Crossley Brothers Ltd [38] where he stated:-

“Upon an agreement to sell it depends upon the intention of the parties whether the property passes or does not pass. Here the parties have in terms expressed their intention, and said that the property shall not pass til the full purchase-money is paid. I know of no reason to prevent that being a perfectly lawful agreement. If that was really the intention of the parties I know of no rule or principle of law which prevents its being given effect to. I quite agree that if, although the partiers have inserted a provision to that effect, they have shewn in other parts of the agreement, by the language they have used or the provisions they had made, that they intended the property to pass, you must look at the transaction as a whole; and it might be necessary to hold that the property has passed, although the parties have said that their intention was that it should not, because they have provided that it shall.”[39]

In conclusion, it was held that it was open to the District Court to make the finding that title had not been intended to pass.

38. (1895) AC 457

39. (1895) AC 457, 463 (Lord Herschell L.C.)

30. In Godfrey v Sevenoaks, the Plaintiff purported to sale a Rolls Royce motor car to a man by the name of Swinbourne who offered to buy the car and proposed to drive it to Melbourne, Victoria. [40] The Plaintiff accepted Swinbourne’s cheque making it clear at the time that he would allow him to have possession of the car but no title to it would pass until the cheque was honoured. A receipt was thereafter handed to Swinbourne. Swinbourne’s cheque was dishonoured. Although the Plaintiff directed him to take the car at once to a garage, Swinbourne did not do so. Swinbourne instead drove the car to Sydney, NSW where he sold it nine days after he purported to acquire it. The Defendant gave Swinbourne a cheque which he promptly cashed and thereafter Swinbourne disappeared from view. Owen J (with whom Roper CJ in Eq. and Manning J agreed) upheld the decision of the District Court Judge that title had not passed to Swinbourne. Owen J held that it was open to the Judge to hold that a term of the contract of sale was that title would not pass until and unless the buyer’s cheque was met. His Honour stated:-

“Assuming that it can properly be said that the terms of the receipt could be regarded as a representation of fact made by the plaintiff to the defendant, it was a representation that a cheque had been received in full payment for the car. Prima facie, a payment by cheque is not complete until the cheque is honoured. A cheque may be taken in full satisfaction of a debt, but the presumption is that the cheque is merely taken on account of the debt. Prima facie, therefore, it seems to me that this receipt was nothing more than a representation of a conditional payment for the car. I do not think that the document can be regarded as an unequivocal representation that Swinbourne was the owner of the car.”[41]

40. (1958) 75 WN (NSW) 487, 488 – 489 (Owen J)

41. Godfrey v Sevenoaks (1958) 75 WN (NSW) 487, 489 (Owen J)

31. Daley v Robinson’s Motors Pty Ltd was decided prior to the decision in Godfrey v Sevenoaks. [42] Relying on the prima facie presumption referred to in Godfrey, the Plaintiff submits that by adopting the reasoning in Davey and in Godfrey, title did not pass to the purchaser for the simple reason that the agreement in both instances was contingent on the seller being put in funds. Absent that element, it was submitted that there was no contract for sale, and there was no meeting of the minds.

    42. Godfrey v Sevenoaks (1958) 75 WN (NSW) 487 was followed in Kingaroy Mall Pty Ltd v E & N Collins Enterprise Pty Ltd & Ors [2008] QSC 66 (10 April 2008) [35] (Daubney J)

32. Although both cases referred to involved circumstances where there was found to be a specific proviso that the property would not pass until the cheque had been met, I do not understand the decision in Godfrey v Sevenoaks to be so contingent; particularly bearing in mind the prima facie statement by Owen J that payment by cheque is not completed until the cheque is honoured. Certainly that seems to be the basis upon which the matter was approached in an analogous case of Eddy v State of New South Wales. [43]

    43. Jinhang and Peiyan Pan v Commissioner for Police; Anthony Eddy v State of New South Wales Police; TQ Heavy Transport Pty Ltd (Mr Quang) v Commissioner for Police and Peiyan Pan (Unreported, District Court of New South Wales, Sorby DCJ, 27 November 2013).

Defendant’s Case

33. Defendant relied on what it termed were three exceptions to the nemo dat quod non habet principle embodied in s 26 (1) of the Sale of Goods Act 1923 (NSW). [44]

    44. Hereinafter referred to as the “1923 Act”

34. The Defendant has drawn attention to the decision of Rein SC DCJ (as his Honour then was) in Vassallo v Haddad Import and Export Pty Ltd. [45] In that case, the Court found that title was intended to pass at the time the cheque was handed to the owner of the motor vehicle. This was so, as on the facts the owner of the vehicle had various reservations arising from the fact that the cheque was neither a bank cheque nor an Australian cheque and thereafter made various inquiries including of the NSW Police. Once satisfied, the owner handed over the keys to the vehicle and filled out the notice of disposal in return for the cheque. [46]

    45. (2004) 2 DCLR (NSW) 123 (“Vassallo”)

    46. Ibid 129 – 130 [19] – [22]

35. Rein SC DCJ stated:-

“The first argument between the parties in relation to this section was whether the fraudster FB1 had a voidable title or not. There was no reservation of title or deferment of the passing of property until clearance of the cheque (cf Davey v Robinson’s Motors Pty Ltd (1957) 75 WN (NSW) 56 and Godfrey v Sevenoaks (1957) 75 WN (NSW) 487), and the contract was an unconditional contract for sale of specific goods in a deliverable state, the property in which passes to the buyer when the contract was made (see s 23 of the SGA) unless the contract was void. Doff contended that the transaction was void because he only intended to deal with Fouad Barhoum, not FB1.” [47]

47. Ibid 137 [47]

Section 27

36. The Defendant contended that the agreement between the parties was voidable not void and as such engages section 27 of the 1923 Act. This section reads as follows:-

27 Sale under voidable title

Where the seller of goods has a voidable title thereto but the seller’s title has not been avoided at the time of the sale, the buyer acquires a good title to the goods, provided the buyer buys them in good faith and without notice of the seller’s defect of title.

37. The Defendant relied on section 22 of the 1923 Act to assert that title passed when intended to pass, and pursuant to section 27 the title was voidable as the predominant intention of the Plaintiff was to contract with the purchasers present before her.

38. The evidence before me is that the Plaintiff accepted a bank cheque and handed relevant documentation to two persons (or more specifically the smaller male) together with the keys expecting that they would return after a test drive. True it is that nothing was said about the need for the cheque to have been cleared prior to the transfer of any title. Nor had the Plaintiff recorded any name although no doubt Mr Ziyang Ou had some details, at least a phone number and perhaps a record from online.

39. The purchasers left with the car without returning.

40. Viewed as a whole the circumstances do not rebut a prima facie presumption that payment is not complete until the cheque is honoured and in the circumstances title did not pass.

41. The Plaintiff was not cross-examined to suggest otherwise.

42. Even accepting the test set out in Southdown Publications Pty Ltd v ACP Magazines Pty Ltd [48] and focussing on the predominant intention of the parties, I would not hold that Ms Chen’s intention was specifically to transact with the person who gave her the cheque, such as to make the transaction voidable in the context of section 27.

    48. (2003) 60 IPR 367 [95] – [96] also referred to in Vassallo 139 – 140 [56] – [57]

43. The evidence was that the smaller of the persons before the Plaintiff indicated that he were to put the car in the name of their uncle’s company. The name of that company was not identified and the transfer form was left blank as to the name of the buyer. In my view, a “voidable title” has not been established.

44. It is unnecessary in this context to consider whether the Defendant acted in good faith.

Section 26

45. The Defendant’s next argument was applying the exception in section 26(1) of the 1923 Act – there was a statutory estoppel. Section 26(1) reads as follows:

26 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.

46. The Defendant acknowledged that there were two types of estoppel potentially raised under section 26, one being reliant on an express representation as to title, and the other being dependant on conduct where the act or omission of the owner enables the seller to create the appearance of ownership. [49]

    49. (2004) 2 DCLR (NSW) 123, 150 [104]

47. In support of its contention that there was an express representation, the Defendant relies upon the fact that the Plaintiff armed the purchasers with “indicia of title”:-

1. Represented that the purchaser held good title to the car;

2. Transferred the vehicle with the certificate of registration; and

3. Represented that the purchaser had the authority to make the sale to the Defendant.

48. In my view, the above does not constitute an express representation made by Ms Chen to the Defendant so as to entitle it to rely on the provisions in section 26(1).

49. In the alternative, the Defendant relied on the above factors constituting conduct where the act or omission of the owner enables the seller to create the appearance of ownership. In Thomas Australia Wholesale Vehicle Trading Co Pty Ltd v Marac Finance Australia Ltd, [50] Glass JA and McHugh JA adopted the criteria for determining the existence of a duty stated by Lord Wilberforce in Moorgate Mercantile Co Limited v Twitchings [51] where his Lordship stated:-

“What I think we are looking for here is an answer to the question whether, having regard to the situation in which the relevant transaction occurred, as known to both parties, a reasonable man, in the position of the ‘acquirer’ of the property, would expect the ‘owner’ acting honestly and responsibly, if he claimed any title in the property, to take steps to make that claim known to, and discoverable by, the ‘acquirer’ and whether, in the face of an omission to do so, the ‘acquirer’ could reasonably assume that no such title was claimed.”

50. (1985) 3 NSWLR 452

51. [1977] AC 890, 903

50. The circumstances in Moorgate Mercantile Co Limited v Twitchings involved a central register of motor vehicle hire purchase agreements maintained by an organisation in which the Plaintiff was a dealer and the Defendant was a financier. Glass JA in Thomas Australia Wholesale Vehicle Trading Co Pty Ltd noted that in the particular context, Lord Wilberforce found that there was a duty of care arising from the existence of the register and in the absence of such an organisation no duty of care and no estoppel could have arisen. His Honour went on to state:-

“… the owner is not precluded by his conduct within the meaning of the Sale of Goods Act, s 26(1), unless he either made a representation to the buyer that the sale was authorised or influenced the buyer to his disadvantage by neglecting to deny the authority of the seller in breach of a duty owed to the buyer or a class of persons to which he belonged. I do not accept that the courts which have construed the statute in this way have imparted to it an alien gloss which defeats the intentions of the legislature. I take my position alongside those who discern in the language of the section an intention that an owner will not be precluded from asserting that he and not the seller had title to the goods sold simply by reason of his failure to disclose his interest to the buyer. His failure must be in breach of a duty to speak out. Unless the conduct of the taciturn owner is subjected to the litmus test of duty, I know of no way to discriminate between conduct which precludes and that which does not.”[52]

52. (1985) 3 NSWLR 452, 468 – 469 (Glass JA)

51. McHugh JA in Thomas Australia Wholesale Vehicle Trading Co Pty Ltd generally agreed with Glass JA, but added:-

The subsection creates a statutory estoppel. An owner may be precluded from denying the seller's authority by reason of his conduct which, expressly or impliedly, constitutes an unambiguous representation to the buyer that the seller has his authority to make the sale: Goodwin v Robarts (1876) 1 App Cas 476 at 489; Low v Bouverie [1891] 3 Ch 82 at 103-106, 113; Canada and Dominion Sugar Co Ltd v Canadian National (West Indies) Steamships Ltd [1947] AC 46 at 55-56; Moorgate Mercantile Co Ltd v Twitchings [1977] AC 890 at 902, 917-918, 922-923. In some cases, the omission of the owner to take steps to prevent the sale may also estop him from asserting his title. But inaction, silence, or even gross carelessness in the protection of property is not of itself enough to preclude an owner from asserting his title: Farquharson Brothers & Co v C King & Co [1902] AC 325 at 335-336; Moorgate Mercantile Co Ltd v Twitchings (at 903, 925). The failure to register the transfer of ownership of a car or to register the existence of a hire purchase agreement over a car does not preclude the owner from asserting his title against one who bought from a person who did not have the owner's authority to sell: Cook v Jenkins [1947] VLR 369; Moorgate Mercantile Co Ltd v Twitchings; Associated Midland Corporation v Sanderson Motors Pty Ltd [1983] 3 NSWLR 395. [53]

53. (1985) 3 NSWLR 452, 469 (McHugh JA)

52. Consistent with these authorities, it was not demonstrated how the Plaintiff’s actions amounted to conduct precluding denial of the seller’s authority to sell for the purposes of section 26(1) of the 1923 Act.

53. In argument, the Defendant all but conceded that it could not to establish a basis as to engage this provision.

Section 28

54. The third basis which the Defendant resists the Plaintiff’s claim is section 28(2) of the 1923 Act. This reads as follows:-

28 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.

55. The question of the application of section 28(2) of the 1923 Act and section 5 of the Factors (Mercantile Agents) Act 1923 (NSW) was raised before in Godfrey v Sevenoaks. [54] Owen J at 489 stated:-

“The argument was, in effect, that as a result of the combined effect of these two sets of provisions the sale to the defendant by Swinbourne was made pursuant to what might be called a statutory power of disposition. The point is an interesting one, but it seems to me to be clear – and counsel for the appellant has frankly and properly conceded – that it was not raised at the trial.”

54. (1958) 75 WN (NSW) 487

56. Roper CJ in Eq. concurred. Manning J came to a similar view referring to the alternative submissions “which is that there was no sale at all to Swinbourne but that Swinbourne acted as the statutory agent of Godfrey in selling to Sevenoaks.”[55]

    55. Godfrey v Sevenoaks (1958) 75 WN (NSW) 487, 490 (Manning J)

57. Despite the fact that this issue was specifically raised, no submissions were forthcoming from the Plaintiff.

58. The purpose of section 28(2) of the 1923 Act was explained in Gamer’s Motor Centre (Newcastle) Pty Ltd v Natwest Wholesale Australia Pty Ltd. [56] In that case, Mason CJ stated:-

“The sub-section needs to be read with its companion provision, s 28(1). The two provisions are statutory exceptions to the general rule enunciated in s 26(1) that a sale of goods by a person who is not the owner and who sells without the authority or consent of the owner confers no better title than the seller has, unless the owner is by his conduct precluded from denying the seller's authority to sell.”[57]

56. (1987) 163 CLR 236

57. Ibid 242

59. Brennan J (as he then was) stated:-

“I do not think that s 28(2) is limited to cases where the sale etc, is made by a buyer ‘in the ordinary course of business of a mercantile agent’. The object of the sub-section is to protect innocent third parties dealing with any buyers without title, not only buyers who are mercantile agents. The operation of the sub-section depends on the hypothesis ‘as if the person making the delivery or transfer were a mercantile agent’, so that the business of that person is hypothetically translated into the business of a mercantile agent. Therefore s 28(2) attracts to a delivery or transfer in the ordinary course of business by that person the same effect as s 5 of the Factors Act attributes to a transfer or delivery under a sale, pledge or disposition by a mercantile agent in the ordinary course of business as a mercantile agent. That was the view taken by Reed J in Langmead v Thyer Rubber Co Ltd [1947] SASR 29 at 39, and by Gresson P and Cleary J in Jeffcott v Andrew Motors Ltd [1960] NZLR 721 at 729. If the buyer were in fact a mercantile agent, what work would s 28(2) have to do that would not be done by s 5 of the Factors Act? The effect of such a s 28(2) delivery is therefore the effect which a delivery would have if the sale etc, under which it was made had the validity attributed to a sale etc, by that part of the text of s 5(1) of the Factors Act which commences with the words ‘subject to …’ set out above. In other words, when there is no applicable qualification to be derived from other provisions of the Factors Act and when the proviso to s 5(1) of the Factors Act does not apply, a delivery of goods falling within s 28(2) has effect as though the buyer were delivering the goods under a sale etc, which he had been expressly authorised by the owner of the goods to make. In the circumstances of the present case, if s 28(2) applies, a delivery of the eight cars whose title is in question by Evans & Rose Motors Pty Ltd, the dealer, to Natwest under a sale to Natwest, would have effect as though the sale had been made by the dealer with the express authority of Gamer.” [58]

58. (1987) 163 CLR 236, 252

60. Bearing this in mind, it is not to the point that Ms Chen retained title. The first question is whether in terms of the section “a person having bought or agreed to buy the goods obtains with the consent of the seller possession of the goods or documents of title to the goods.” Despite the fact that Ms Chen was induced to do so by fraud, she did hand over the vehicle, the keys, registration /transfer papers to the Asian males.

61. Rein SC DCJ in Vassallo stated:

It is clear that s 28(2) has no application where the seller is not the true owner of the goods but has stolen them from the true owner and a purchaser in good faith from the seller seeks to rely on the subsection: see also National Employers’ Mutual General Insurance Association Ltd v Jones [1990] 1 AC 24 where it was held that 28(2) was never intended to affect adversely the title of one from whom the goods had been stolen. Where, however, the seller is the owner of the goods (as here) and puts the goods into the hands of the person who has bought or agreed to buy the goods (ie here the fraudster) I think the provisions do apply. [59]

59. Vassallo 149 [94]

62. A similar view was taken in Langmead v Thyer Rubber Co. Limited. [60] In that case per Napier CJ:-

I agree that the language of sub-s(2)- “obtains with the consent of the seller, possession of the goods” – must be reasonably understood and applied. It was assumed in Marten v Whale (1917) 2 K.B 480 that this language is not restricted to possession which is obtained under or pursuant to a contract for sale; but nevertheless I think that the sub-section contemplates something resembling a causal connection between the two conditions which bring the enactment into play.. The literal sense of the words – “having … agreed … obtains” – is not satisfied unless the agreement to buy is antecedent to the obtaining by consent. It seems to me that the enactment assumes that “post hoc” is “proper hoc” and I doubt whether it should be applied to a case in which possession is obtained for a special and temporary purpose for which cannot be related to the contractual intention”[61]

Reed J stated:-

Section 25(2) relates to cases where a person who has bought or agreed to buy goods obtains possession of them. If the goods have been “bought” the property has passed, and there will probably not be many cases where the seller will have rights of the nature mentioned in Halsbury’s Laws of England, vol.29, 2nd ed., at p.165. Most cases under s.25(2) will be those where property has not passed, but the buyer has obtained possession of the goods.

What may be called the policy underlying each sub-section appears to be the same in substance, and on a consideration of that, and of the language of the section, it would appear to be immaterial under sub-s.(2) that the seller allows the buyer to have possession for a particular purpose, just as under sub-s.(1) it does not matter why the buyer permits the seller to remain in or have possession. The cases cited seem to show that the point is whether the possession of the one or the other is directly referable to, or arises out of the relationship of buyer and seller. [62]    

60. [1947] SASR 29

61. Ibid [33] – [34]

62. Ibid [41]

63. On these authorities I accept that even if induced by fraud, there was consent to possession within the terms of section 28(2).

64. The remaining question is whether the Defendant received the items in question “in good faith and without notice of any lien or other right of the original seller in respect of the goods.” The Defendant accepts that it bears the onus of establishing this fact. In section 5(2) of the 1923 Act, it is specified that:-

5 Definitions

(2) A thing is deemed to be done "in good faith" within the meaning of this Act when it is in fact done honestly, whether it be done negligently or not.

65. Ms Silvana Giannoulis gave evidence set out the steps she took. It was not put to her that there were any circumstances amounting to suspicion or refraining from making an inquiry. Nor did the Plaintiff make any submission in this regard. I accept that upon receipt of the driver’s licence, there was a matching up of the person in front and the name on the registration papers. Upon review of the PPSR and confirmation received from Ms Giannoulis. Mr Fernandez had no reason to believe that the car was stolen or improperly obtained. The price paid of $98,000 was not such as to invite any suspicion. [63] Absence of good faith is not established where dealers in second hand motor vehicles might be more astute or careful. [64]

    63. See: Heap v Motorists’ Advisory Agency Ltd [1923] 1 KB 577 cited in Detective Senior Constable Wilkes v Abou-Yaghi [2012] NSWDC 6 [66] (Gibson DCJ); and Vassallo 146 – 147 [83]

    64. Ingram v Little [1961] 1 QB 31, 47 (Sellers LJ) quoted in Vassallo 145, [75]. See also: Associated Midland Corp v Sanderson Motors Pty Ltd [1983] 3 NSWLR 395, 401 – 2 (Clarke J)

66. Whilst the transfer of fund details provided were to a third party bank account, it was not put to the Defendant’s witnesses that this should have led to suspicion and nor any submission made that this amounted to an absence of good faith.

67. For these reasons and bearing in particular the requirement of section 140(2)(c) of the Evidence Act 1995 (NSW), [65] I accept that the Defendant’s receipt of the property was in good faith and without notice within the terms of section 28(2) of the 1923 Act.

    65. See also: Briginshaw v Briginshaw (1938) 60 CLR 336; and Neat Holdings Pty Ltd v Karajan Holdings Pty Ltd (1992) 110 ALR 449, 449 – 50 (Mason CJ, Brennan, Deane and Gaudron JJ)

68. The Defendant having succeeded there is no occasion to consider whether an order for the delivery of the goods under section 93(1)(a) of the 2005 Act would be appropriate.

69. In the circumstances, I make the following orders:-

1. Verdict for the Defendant;

2. The Plaintiff is to pay the Defendant’s costs; and

3. Exhibits to be retained for 28 days.

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Endnotes

Amendments

21 March 2016 - Changed case name - removed ABN

Decision last updated: 21 March 2016