Four Point Garage Ltd v Carter

[1985] 3 All ER 12

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(Judgment by: Simon Brown J)

Between: Four Point Garage Ltd
And: Carter

Court:

Judge:
Simon Brown J

Subject References:
Sale of goods
Passing of property
Vendor retaining property in goods
Disposition by buyer after sale
Buyer never in possession of goods
Buyer selling goods on to sub-purchaser
Seller delivering goods to sub-purchaser at request of buyer
Contract for sale of car
Contract reserving seller's title to car until car paid for
Buyer reselling car to sub-purchaser
Seller delivering car direct to sub-purchaser
Buyer going into liquidation before paying seller for car
Whether seller entitled to recover vehicle under reservation of title clause in contract
Whether reservation of title clause preventing passing of title to bona fide sub-purchaser
Whether delivery of goods direct to sub-purchaser by seller passing good title to sub-purchaser
Whether seller delivering car to sub-purchaser as deemed agent of buyer

Legislative References:
Sale of Goods Act 1979 - s 25

Case References:
Aluminium Industrie Vaassen BV v Romalpa Aluminium Ltd - [1976] 2 All ER 552; [1976] 1 WLR 676, CA
Heyman v Flewker - (1863) 13 CBNS 519; 143 ER 205
Ruben (E & S) Ltd v Faire Bros & Co Ltd - [1949] 1 All ER 215; [1949] 1 KB 254

Judgment date: 9 November 1984

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Judgment by:
Simon Brown J

Either the plaintiff or the defendant in these proceedings is entitled to the property in and possession of a Ford Escort motor car. The question is which.

This issue arose as recently as mid-October just passed, some three and a half weeks ago, and thus it comes before the court with marked and wholly commendable speed. That is due not least to the facts being put before me pursuant to an order of the court by affidavit evidence only. This is to my mind a highly convenient mode of trial, saving of both time and costs, and it should gain wider currency. It can only work, of course, where, as here, the facts are not in dispute and lie within a forseeably small compass.

The relevant facts here may be shortly stated most conveniently perhaps by reference to the chronology of events. In late September of this year the defendant desired to buy a new motor car, namely a Ford Escort XR3i model with certain accessories. He made a number of inquiries and eventually on about 1 October, as a result of what he had by then learned, he contacted Freeway (Cougar) Ltd (whom I shall call 'Freeway'). He was told that such a motor car was available for immediate delivery. The figure of £6,889 was quoted to him. He asked for the matter to be left over for a day so that he could consult his wife, duly did so, determined to buy the car and again spoke to Freeway the following day. On that occasion, 2 October, he agreed to buy the car in a week's time, more precisely on 10 October, that enabling him to make the necessary financial arrangements. He was at that stage given its intended registration number. On that day there was compiled by Freeway their invoice to the defendant in regard to that motor car in the figure I have mentioned. In the mean time (it is unclear and matters not precisely when) Freeway had been in touch with the plaintiff garage and had made at least tentative arrangements to purchase from them this same motor car.

On 8 October the defendant posted to Freeway two cheques together totalling the contract price and arranged with Freeway that delivery of the motor car would be made to him on 10 October. On 9 October the plaintiffs invoiced Freeway in regard to the same motor car in the sum of £6,746.46. It is common ground that Freeway were achieving but the narrowest profit margin on the transaction no doubt, as later became all too clear, because of the acute financial difficulties they were in. The plaintiffs were also persuaded by Freeway to effect urgent delivery of the motor car to the defendant direct, and they duly did so on 10 October, the defendant signing a delivery note for it.

The defendant was wholly unaware of the existence of the plaintiff company throughout this entire time and believed that the delivery had been made to him by Freeway directly. Common to both contracts was a term often referred to as a Romalpa clause. That perhaps most relevant here is to be found in the plaintiffs' documentation, and it provides thus:

'The buyer is advised that title to the goods contained in this invoice remains with the seller until such goods are fully paid.'

The plaintiffs believed at all times that Freeway were not themselves a garage retailing new motor cars but on the contrary were engaged in the leasing and hiring of motor cars. They accordingly understood that the defendant to whom they made direct delivery on 10 October, was just such a customer rather than a sub-purchaser of their motor car.

On 13 October the plaintiffs received a notice dated 10 October under s 293 of the Companies Act 1948 in effect notifying them that Freeway were going into liquidation. Freeway, as I understand it, have since gone into liquidation. It is at all events plain that the unsuccessful party to these proceedings stands little, if any, prospect of recovering their loss from that insolvent party.

Having received that notice and considered their position, the plaintiffs tried to recover the motor car from the defendant to whom a week earlier they had delivered it. It was then that for the first time the defendant became alive to their separate existence. He resisted their efforts to repossess. The matter came before Nolan J on 19 October he made the necessary orders providing for trial in the manner I have indicated. Pursuant to his order the writ was issued on 23 October. By it the plaintiffs seek a declaration of ownership relative to the motor car. It is common ground between the parties that each of them have acted throughout in good faith and that one or other of them is accordingly the innocent victim of Freeway's insolvency.

From these facts it is plain, first, that Freeway never acquired good title to the motor car as between themselves and the plaintiffs since they never made payment in regard to the motor car and thus fell foul of the Romalpa clause, and, second, that both parties acted in perfect good faith, the plaintiffs for their part believing that they would retain title in the motor car until payment was made to them, the defendant for his, believing that he had purchased the motor car from Freeway, they having a good title to pass to him, and further believing that such title had indeed passed to him on his making payment and receiving the motor car.

The plaintiffs' argument runs essentially as follows.

(1)

The Romalpa clause prevents title passing from the plaintiffs to Freeway, the latter not having paid the price of the goods. Thus, when Freeway sold the motor car to the defendant he acquired no better title than they had had themselves.

(2)

The defendant can only therefore succeed in establishing his entitlement to the vehicle if he can bring himself within s 25 of the Sale of Goods Act 1979. That, so far as relevant, provides by sub-s (1):

'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 him, 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, has the same effect as if the person making the delivery or transfer were a mercantile agent in possession of the goods or documents of title with the consent of the owner.'

(3)

The defendant cannot bring himself within s 25 because (a) even accepting (as the plaintiffs do) that Freeway had agreed to buy the motor car from the plaintiffs (and I interpolate that the Romalpa clause was inconsistent with their having actually bought it: see s 2(5) of the 1979 Act) Freeway never obtained possession of the goods, further or alternatively (b) Freeway never delivered the goods to the defendant, (c) nor can the defendant escape this latter problem by invoking the mercantile agent limb of the provision since it is clear that the plaintiffs, in effecting delivery to the defendant, were not acting as mercantile agent for Freeway. To be a mercantile agent requires that one's employment or activity should correspond to that of some known kind of commercial agent rather than that one should act as an independent contracting party (see Heyman v Flewker (1863) 13 CBNS 519, 143 ER 205).

With proposition 3(c) counsel for the defendant agrees. Counsel for the defendant does, however, contend that he can, if he needs, bring himself within the ambit of s 25 of the 1979 Act so as to obtain title under its provisions. He further contends that despite the Romalpa clause there was nothing here in the contractual relationship between the plaintiffs and Freeway which precluded their passing good title to the defendant independently of the 1979 Act, namely a better title than they themselves acquired.

His starting point, or at least a convenient base line for his submissions, is Benjamin's Sale of Goods (2nd edn, 1981) para 397, which reads in part:

'The title of sub-purchasers from the buyer of goods supplied subject to a "Romalpa" clause is not affected by the existence of the clause. They acquire a good title under section 25 of the Sale of Goods Act 1979, or more probably by virtue of the fact that the buyer has the implied authority of the seller to sell the goods in the ordinary course of business and to confer a good title on sub-purchasers.'

I turn to consider both those bases of claim, first s 25. The defendant contends essentially that on the agreed facts of this case Freeway obtained constructive possession of the motor car and made constructive delivery of it to the defendant alternatively in this latter regard that the plaintiffs should properly be regarded as Freeway's agents for the purposes of effecting delivery within the subsection.

In support of these propositions counsel for the defendant cites E & S Ruben Ltd v Faire Bros & Co Ltd [1949] 1 All ER 215, [1949] 1 KB 254. There the plaintiff sellers sold to the defendant buyers a quantity of rubber material for sale on by the buyers to footwear manufacturers. By agreement on all sides the plaintiffs delivered the goods direct to the manufacturers. The manufacturers therafter rejected the goods and the buyers in their turn then sought to do likewise. It was held, however, that they had lost the right to reject because they had acted inconsistently with the sellers' ownership within the meaning of s 35 of the Sale of Goods Act 1893, namely by constructively taking delivery of the goods at the sellers' premises. Hilbery J put it thus ([1949] 1 KB 254 at 259 cf [1949] 1 All ER 215 at 217-218):

'When the buyers' representative intimated to the sellers that he would take ten tons of the rubber offered, five tons to be delivered at once and five tons later, and asked them to act for him and send the goods direct to the Skelmersdale company and they agreed, the buyers were taking delivery constructively at the sellers' premises when the sellers set aside goods against the contract. Thereafter the sellers were acting for the buyers as agents in putting the goods on the lorry and dispatching them on their journey to Lancashire.'

Counsel for the plaintiffs says that that principle is only available to defeat a buyer in circumstances such as obtained there and not to assist the buyer's customer in the markedly different circumstances arising here. He adds that the authority is properly ignored by Professor Guest (the editor of Benjamin's Sale of Goods) in this context albeit it is cited in other parts of the work.

I cannot agree. It seems to me a perfectly sound principle of general application. There appears no possible good reason to differentiate under the statute between a case where, as here, the plaintiff sellers themselves deliver direct to the sub-purchaser and a case where, as could so easily have occurred instead, the seller delivers to his buyer, who then forthwith delivers on to the sub-purchaser. Often no doubt the precise arrangement would depend on no more than the geographical interrelationship of the three parties.

Moreover, I suspect that the reason why Professor Guest does not refer to Ruben's case in this connection is because he never contemplated a case in which the party contesting the bona fide sub-purchaser's entitlement to the goods is the very party who effected their actual physical delivery to such sub-purchaser. That, of course, is the situation obtaining here, and fairly rarely, I suspect, does it occur.

Lest that conclusion be wrong, however, I turn to the other limb of the defendant's argument, namely that the plaintiffs here impliedly authorised Freeway to sell the motor car. Here counsel for the defendant cites the Romalpa decision itself, Aluminium Industrie Vaassen BV v Romalpa Aluminium Ltd [1976] 2 All ER 552 esp at 563, [1976] 1 WLR 676 esp at 690 per Roskill LJ:

'I see no difficulty in the contractual concept that, as between the defendants and their sub-purchasers, the defendants sold as principals, but that, as between themselves and the plaintiffs, those goods which they were selling as principals within their implied authority from the plaintiffs were the plaintiffs' goods which they were selling as agents for the plaintiffs to whom they remained fully accountable.'

That passage should be put in the context of an earlier passage of his judgment where Roskill LJ said ([1976] 2 All ER 552 at 563, [1976] 1 WLR 676 at 689):

'It was common ground at the trial and during argument in this court that some implication had to be made into the first part of cl 13 [I interpolate that that was the Romalpa clause]; since otherwise the defendants could not lawfully sell the unmanufactured goods in their possession, at least until they were paid for-for, as already pointed out, they were the plaintiffs' and not the defendants' goods. To hold otherwise, as I think both parties accepted, would be to stultify the whole business purpose of these transactions.'

Counsel for the plaintiffs says of that decision, and indeed of others which have later applied it, that they were cases where the original product was being sold not for straightforward resale, as with the motor car here, but rather for incorporation within a manufacturing process. He urges me to resist the temptation to apply that principle in the different circumstances of this case, particularly having regard to the plaintiffs' actual belief as to the nature of Freeway's business. Although, however, the plaintiffs believed that Freeway did not sell motor cars but rather leased or hired them, this was plainly not in fact the position and Freeway were unaware of the plaintiffs' misapprehension. In my judgment, therefore, the term to be implied into the contract between the plaintiffs and Freeway in regard to sub-selling the goods cannot be affected by the plaintiffs' misapprehension. Freeway had not induced it and it is to my mind nothing to the point in this regard that Freeway may well have been acting unlawfully in other respects, such as knowingly trading whilst insolvent. Nor can the Romalpa principle of implied authorisation to sub-sell otherwise be distinguished on the facts of this case.

In short, I conclude that the form of Romalpa clause applying here is insufficient, as between commercial garages, to preclude the proper implication of a term authorising the garage which buys from reselling the goods if that is in fact in the ordinary course of its business and if it is unaware that the selling garage believes otherwise.

Thus in my judgment the defendant succeeds on both arguments, either of which alone would, of course, be sufficient to entitle him to judgment in the action. One has inevitably, in a case such as this, sympathy with both parties. Only one, however, can succeed, and in my judgment it is the defendant who establishes the legal right to the property here in question.

Judgment for the defendant.