City Motors (1933) Pty Ltd V
v Southern Aerial Super Service Pty Ltd

Judges: Dixon CJ
Kitto J

Windeyer J

Subject References:
Sale of goods
Hire Purchase
Possession
Trespass to goods
Right of bailee to maintain action of detinue against bailor to regain possession

Sydney

Judgment by:
Windeyer J

The acquisition of a motor vehicle from a dealer on hire-purchase terms is very commonly effected by the intervention of a finance company. Recently Harman L.J. has remarked on the artificiality that is involved: Yeoman Credit Ltd v Apps ^[F17] . When the dealer and the finance company, although separate persons in law, are in reality separate parts of one trading organization, the legal jugglery is certainly not lessened. But the legal nature of the transactions involved is not often adverted to by those concerned. They simply fill in the appropriate forms; and ordinarily no difficulty arises. This case, however, is out of the ordinary.

The appellant and the respondent had come to an agreement that the respondent was to have a new vehicle for PD2,700. Of this sum PD1,450 was to be paid by barter of the old vehicle. It was contemplated by the parties that the balance would be provided by a finance company. To this end Gangell, on behalf of the respondent, signed a form of offer to Perpetual Insurance and Securities Limited, a hire-purchase finance company associated with the appellant, to hire from it the new vehicle on hire-purchase terms. If this offer had been accepted, the proposal would have been carried into effect, according to common form, by the appellant company being paid by the finance company and transferring the legal ownership of the new vehicle to the finance company, which would then have hired it on hire-purchase terms to the respondent company. The offer was not accepted by the finance company. But in the meantime the appellant had delivered the new vehicle and had taken delivery of the old vehicle from the respondent; that is to say, it had received part of the agreed purchase price of the new vehicle. I can see no ground at all for saying that because the finance company, a third party, refused-it matters not for what reason-to accept the respondent's offer, the appellant became entitled to treat the whole transaction between it and the respondent as at an end. Some other finance company might have been prepared to provide the finance or the respondent might in some other way find the sum of PD1,250 to pay the appellant. But of this the appellant did not stay to inquire. Against the will of the respondent it took the new vehicle out of its possession. To Gangell's protest and offer to pay PD1,250 at once, Kemmis said he had "no authority to deal any further. The agreement had been rejected and that was that". The respondent thereafter tendered its cheque for PD1,250 but the appellant refused to accept it. The reason the appellant refused the tendered cheque was not that it required cash, not a cheque, but because it would not carry out its contract.

The learned trial judge held that the property in the new vehicle was not transferred to the respondent on the making of the bargain between the appellant and the respondent because that was not the intention of the parties: it would have been inconsistent with the proposed hire-purchase from a finance company. The parties contemplated that upon receiving PD1,250 the appellant would transfer its ownership of the vehicle to whoever paid the money, a finance company or the respondent. In that view of the transaction his Honour was, in my opinion, right. He went on, however, to say that the property in the new vehicle passed to the respondent when the cheque was tendered-that the agreement to sell then ripened into an actual sale. I have difficulty in taking this step with his Honour. The property did not pass by virtue of the contract as it would have in an ordinary agreement for sale. The agreement was that it would pass upon payment. In such circumstances tender is equivalent to payment: a seller cannot, by refusing to accept the proferred payment, prevent the property passing. This has been laid down in decisions in the United States following Dame v Hanson ^[F18] and it is consistent with our law of sale. But in this case the position is not so simple, because before the tender was made the appellant had renounced the transaction and refused to go on with it. The respondent when informed of the appellant's attitude could have rescinded the contract and brought an action for damages at once. Alternatively, it could do as it did, that is treat the agreement as still afoot and tender performance on its part, giving the appellant "the opportunity of withdrawing from its false position"; but in that case, when protests proved unavailing, "its only remedy in the end is also a claim for damages", the contract not being specifically enforceable: Heyman v Darwins Ltd ^[F19] . When it refused the tender the appellant showed that it was adhering to its renunciation. In Martindale v Smith ^[F20] to which his Honour referred the property had already passed by bargain and sale, the seller having merely a possessory lien. And in Mirabita v Imperial Ottoman Bank ^[F21] , the other case to which he referred, the seller's dealing with the bill of lading was taken to evidence an intention only to secure the contract price. The distinction between that kind of case and one in which the seller manifests an intention to renounce the contract is clear in principle, although the application of the distinction in particular cases is often difficult: see Halsbury's Laws of England, 3rd ed., vol. 34, pp. 182, 183. Here the appellant had, I consider, withdrawn the vehicle from the contract before the tender was made. It had already gone back upon its promise. The respondent had, no doubt, a right of action for damages for breach of the agreement but it could no longer insist on turning the agreement into a sale by tendering payment. Its rights lay in contract, not in ownership: cf. Wait v Baker ^[F22] ; The Parchim ^[F23] . And the contract was not one of which equity would decree specific performance. Although I appreciate that a different view can be taken, those are my reasons for thinking that the learned trial judge was wrong in deciding the case on the basis that the respondent had become the owner. A different theory of the effect of a conditional sale is accepted in some jurisdictions in the United States but the American decisions, although instructive, are conflicting: see 47 American Jurisprudence, Sales ss. 828, 868-871, Williston on Sales Rev. ed. (1948) vol. 2 s.331 p. 288 and the judgments and annotations in Nevada Motor Co v Bream ^[F24] ; Walker v Houston ^[F25] and Bisi v American Automobile Insurance Co ^[F26] .

As I feel unable to take the step that his Honour took, it becomes necessary to consider the rights of the parties on the basis that the ownership did not pass. The Chief Justice has shown in his judgment, which I have had the advantage of reading, that the question can be approached through the law of bailment. And, when it is so approached, the plaintiff, the respondent here, was entitled to succeed. To use the words of Chambre J. in Roberts v Wyatt ^[F27] : "It is not necessary at present to go into the absolute property. This action can be sustained on the right of possession, which the plaintiff clearly at this time had" ^[F28] . An unpaid seller who has delivered his goods into the possession of a buyer but who has not parted with the property in them is a bailor, and the buyer, or prospective buyer, a bailee. The question is discussed in the learned judgment of Turner J. in Motor Mart Limited v Webb ^[F29] , to which I am indebted. The appellant delivered the new truck to the respondent to be used by it pending the completion of arrangements for the payment of the outstanding balance of the purchase price by some means but not necessarily by the aid of any particular finance company. The respondent was not a mere licensee. He was a bailee. The bailment was not gratuitous. It was a part of a complex transaction in which the delivery to the bailor of the traded-in truck formed part of the consideration, so that it was not a bailment terminable by demand.

In Bacon's Abridgment under "Bailment", this appears: "If A. borrow a horse to ride to Dover, and he ride out of his way, and the owner of the horse meet him, he cannot take the horse from him, for A. has a special property in the horse till the journey is determined; and being in lawful possession of the horse, the owner cannot violently seize and take it away, for the continuance of all property is to be taken from the form of the original bargain, which in this case was limited till the appointed journey was finished". The special property or right to possession, which a bailee has, can thus be asserted even against the owner. This appears most strikingly in the rule of the criminal law that an owner who takes his own goods out of the possession of a bailee may be guilty of larceny: Rose v Matt ^[F30] ; Reg. v Hough & Drew ^[F31] . Similarly, a bailee wrongfully dispossessed by the bailor can sue either for trespass to goods or in trover or in detinue (see Roberts v Wyatt ^[F32] ); and perhaps in some cases for replevin. That a bailee can bring detinue against his bailor is an illustration of the flexibility that fictions can give to legal forms, for historically the action of detinue was based upon an actual or fictitious bailment by the plaintiff to the defendant. The proposition in Comyn's Digest that "detinue does not lie ... if the defendant took the goods as a trespasser, for by the trespass the property of the plaintiff is divested" has long been considered mistaken: see Selwyn's Nisi Prius under "Detinue". At common law a judgment for the plaintiff in detinue required the defendant either to return the chattel to the plaintiff or pay him its value and also to pay damages for its detention. The defendant had an option not to return the chattel, but to keep it and pay its value together with damages: Crossfield v Such ^[F33] . This was altered in England by the Common Law Procedure Act, 1854, s. 78. In proceedings between a bailee and a third party the interest of the bailee in the chattel is its full value: The Winkfield ^[F34] . But where the defendant is the bailor, and thus himself has an interest in the chattel, what is in question is the value of the interest of the plaintiff as between himself and the defendant: Chinery v Viall ^[F35] ; Johnson v Stear ^[F36] ; Belsize Motor Supply Co v Cox ^[F37] ; Garven v Ronald Motors Pty Ltd ^[F38] .

In this case a verdict for the plaintiff in the action being supportable on the basis of bailment, and order of Crawford J. being in accordance with the ultimate intent of the bargain between the parties, I agree that the appeal should be dismissed.