York International Australia Pty Ltd v Heller Financial Services Pty Ltd & Anor

[2001] VSCA 45

SUPREME COURT OF VICTORIA

COURT OF APPEAL

No. 6598 of 1999

YORK INTERNATIONAL AUSTRALIA PTY. LTD.

Appellant/Plaintiff

v.

HELLER FINANCIAL SERVICES PTY. LTD.

AND

WESTPAC BANKING CORPORATION

Respondents/Defendants

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JUDGES:	CHARLES, CALLAWAY and BUCHANAN, JJ.A.
WHERE HELD:	MELBOURNE
DATE OF HEARING:	7-8 March 2001
DATE OF JUDGMENT:	19 April 2001
MEDIUM NEUTRAL CITATION:	[2001] VSCA 45

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CONVERSION – Goods sold subject to retention of title clause – Whether predicated on bailment – Obligation to account for proceeds of sub-sale in specie – Whether cheque "proceeds" – Seller's right to sue in conversion.

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APPEARANCES:	Counsel	Solicitors
For the Appellant/Plaintiff	Mr G.P. Harris	Charles Fice
For the Respondents/Defendants	Mr M.F. Wheelahan	Middletons Moore & Bevins

CHARLES, J.A.:

1. This appeal raised a considerable number of questions, all of which were well argued by both counsel.  But, as Callaway, J.A. demonstrates, the appellant's case in conversion depends upon the application of the retention of title clause to the facts.  I agree with his Honour that the clause does no more than regulate a bailment that the draftsman assumed would take place from the Seller to the Buyer.  And, it was common ground that no such bailment had occurred prior to the alleged conversion of the cheque.

1. It is therefore unnecessary to resolve any of the other issues in the cases.

1. I agree with Callaway, J.A. that the appeal should be dismissed.

CALLAWAY, J.A.:

1. On 24th December 1997 the appellant filed a writ in the County Court seeking damages for the alleged conversion of a cheque by each of the respondents.[1]  The trial judge gave judgment for the respondents on 9th August 1999.  It is against that judgment that the present appeal is brought.  A number of issues were argued, attractively and with skill, at both ends of the Bar table, but they need not be resolved.  Her Honour's decision was right because the retention of title clause on which the appellant relies did not, on its true construction, apply in relation to the cheque.

   [1]An alternative cause of action for money had and received is no longer pursued.

1. Before coming to the clause, I shall say something briefly about the background facts.  KF Air Conditioning Pty. Ltd. ("KF Air") was a company engaged in providing and installing air-conditioning systems for building works.  LU Simon Builders Pty. Ltd. ("LU Simon") was a building company which, in 1996, entered into a contract to undertake renovation works at 33 St Andrew's Place, East Melbourne.  Those works included the installation of an air-conditioning unit and the associated ductwork and piping.  (I shall refer to the air-conditioning unit as "the chiller".)  LU

Simon entered into a sub-contract with KF Air for the provision of labour, plant and equipment to carry out mechanical works that included the installation and commissioning of the chiller.

1. In or about February 1997 the appellant agreed to supply KF Air with a chiller for a total price of $90,500.  One of the issues at the trial, and on appeal, was whether that agreement incorporated the appellant's standard conditions of sale.[2]  It is those conditions of sale which include the retention of title clause on which the case turns.  The learned judge took the view that the appellant's conditions were incorporated in February 1997.[3]  I shall assume in favour of the appellant, without deciding, that that conclusion was correct.

   [2]There had been a typical "battle of the forms".

   [3]The date is significant, for it means that the retention of title clause was incorporated prior to the alleged acts of conversion, which took place on 13th March 1997.

1. On 13th March 1997 LU Simon drew a cheque payable to KF Air in the sum of $99,000 to enable KF Air to pay the appellant for the chiller.[4]  The cheque, which was an order cheque, was deposited in the first respondent's account with the second respondent for collection.  That was said to have been done under a debt factoring agreement between the first respondent and KF Air.  The cheque was not indorsed.  The chiller was delivered by the appellant to LU Simon at its premises in Abbotsford on 24th March 1997.

   [4]It will be observed that the amount of the cheque exceeded the price of the chiller.  That gave rise to an argument that, in any event, the cheque was not the "proceeds" of any sale of the chiller by KF Air but was either a progress payment under the sub-contract between LU Simon and KF Air or representative of the proceeds of sale plus other items.  For reasons that will appear, it is unnecessary to consider that argument.

1. The relevant paragraphs of the retention of title clause read:

"Terms Of Payment

All goods remain the property of YORK until the goods are paid for, and the Buyer's cheque has been cleared by YORK's bank.  The goods are to be clearly identified by the Buyer as remaining the Property of YORK until they are paid for.  Property in the Goods does not pass to the Purchaser until:  (a) the Purchaser has paid the Purchase price in full and there is no Purchaser's debt outstanding to the Seller;  or (b),

the goods are supplied and delivered to a sub-purchaser.  Until such time as the goods have been paid for in full, the Purchaser is at liberty to sell the goods in the ordinary course of its business as agent for the Seller and shall account to the Seller for any such proceeds.

The Purchaser's debt to the Seller shall be reduced to the extent of the proceeds actually received by the Seller and to the extent (if any) that any proceeds received by the Seller exceed the Purchaser's debt, the Seller shall be indebted to the Purchaser in the amount of the surplus but nothing in this clause shall constitute the Seller a trustee of the Purchaser with respect to any proceeds or constitute the Seller a mortgagee.

The Purchaser shall as bailee of the goods:

(a)to the extent required by the Seller, keep the goods separate from other goods in the possession of the Purchaser;

(b)account to the Seller in specie in respect of any proceeds received by the Purchaser;  and

(c)concur in directing any Sub-Purchaser to pay proceeds to the Seller."

"York" and the "Seller" are the appellant and the "Buyer" and the "Purchaser" are KF Air.

1. The appellant's case in conversion depends on the application of that clause to the facts.  Its case is, in essence –

(a)that KF Air sold the chiller to LU Simon pursuant to the last sentence of the first paragraph of the clause;

(b)that it did so as agent for the appellant and accordingly was obliged to account to the appellant for the proceeds of that sale; 

(c)that the cheque for $99,000 was, or was part of, those proceeds;  and

(d)that KF Air was obliged to account for the cheque in specie pursuant to sub-paragraph (b) of the third paragraph of the clause.

1. Her Honour concluded that there was no sale to LU Simon or at all.  I find it unnecessary to consider that question because, in my opinion, the retention of title clause does no more than regulate a bailment that the draftsman assumed would take place from the Seller to the Buyer.  It is common ground that no such bailment took place in the present case, at all events prior to the alleged conversions of the cheque.  As I have already mentioned, the chiller was not delivered until 24th March 1997 and it was then delivered to LU Simon, not KF Air. 

1. The scheme of the clause is that the goods are to remain the property of the Seller until payment of the purchase price or supply and delivery to a sub-purchaser.  In the meantime they are to be clearly identified by the Buyer as remaining the property of the Seller, but the Buyer (also called the Purchaser) may sell the goods as agent for the Seller.  If it does so, it is obliged to account for the proceeds in specie as bailee of the goods.  The clause is concerned with legal property and the accounting in specie is of the kind referred to by Jordan, C.J. in R. v. Ward[5].  At 314 his Honour said:

"At common law, a chattel is bailed if it is delivered on the terms that it is to remain the property of the bailor, but is to be returned or delivered on his account.  Further, if a chattel is delivered on the terms that it is to be sold and the actual proceeds of sale handed over in specie to the owner of the chattel, there is a bailment of the chattel until it is sold, and then a bailment of the proceeds of sale when they are received."

Accordingly, in cases to which the clause applies, a cheque might very well be "proceeds" to be accounted for in specie and the appellant have a right to sue in conversion[6], but the language of the clause presupposes a bailment.[7]

[5](1938) 38 S.R.(N.S.W.) 308.

[6]See also 315 and Reece v. Harris [1943] S.A.S.R. 127 at 130.

[7]Compare Pfeiffer G.m.b.H. v. Arbuthnot Factors Ltd. [1988] 1 W.L.R. 150 at 158-159.

1. There really is no more to be said.  The clause regulated a bailment that did not take place.  The obligation to account in specie in respect of the proceeds was expressly predicated on the Buyer's being a bailee, but, in my opinion, the relationship of bailor and bailee is assumed throughout the clause, not only in the third paragraph.  If the clause failed to give the appellant the right to sue for conversion of the cheque in the events that happened and because it was unsuitable

to the transaction between the appellant and KF Air[8], that is the appellant's misfortune.[9]

[8]We are not concerned with any other rights, at law or in equity, that the provisions of the clause as to the passing of property or otherwise, together with the transaction, may have conferred on the appellant or whether they would have had any commercial value.

[9]Compare Associated Alloys Pty. Ltd. v. ACN 001 452 106 Pty. Ltd. (2000) 171 A.L.R. 568 at [24].

1. I would dismiss the appeal.

BUCHANAN, J.A.:

1. I concur in the judgment of Callaway, J.A.

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