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

106 CLR 477

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(Decision by: Dixon CJ)

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

Court:

Judges:
Dixon CJKitto 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

Hearing date: 16 February 1961; 17 February 1961 (Hobart)
Judgment date: 21 August 1961

Sydney

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Decision by:
Dixon CJ

This appeal is from a judgment of the Supreme Court of Tasmania given for the plaintiff by Crawford J., whereby it was adjudged that the plaintiff do have the return of a certain motor truck on payment by the plaintiff to the defendant of PD1,250 or do recover against the defendant the sum of PD1,450 being the value of the vehicle PD2,700 less PD1,250 the amount due by the plaintiff to the defendant under a contract of sale of the said vehicle.

The first alternative of the judgment is evidently based upon the hypothesis that property in the motor truck is vested in the plaintiff but he cannot recover possession except on payment of PD1,250, which as will appear, is the residue of the price payable therefor by the plaintiff to the defendant. That cannot mean that a lien subsisted for unpaid purchase money for in that event the buyer would not be entitled to possession: Lord v Price [1]. The second alternative is based simply on the view that property having passed to the buyer, as an alternative to delivery or redelivery, he can recover the value of the chattel less unpaid purchase money: cf. Chinery v Viall ^[F2] . In this form of judgment the option to deliver the goods or pay their value lay with the defendant (Phillips v Jones ^[F3] ) and this seems still to be so, unless a special order be made: cf. Bailey v Gill ^[F4] .

The question to which the judgment provides a solution, though a solution strongly challenged by the appellant, arises from a very commonplace transaction going amiss in an unexpected way at an unexpected point. The transaction was simply the purchase, on hire purchase terms provided by a motor finance or acceptance company, of a new motor vehicle with the trading-in of an old one to cover a substantial part of the price. What went wrong was the break-down of the motor vehicle traded-in after it had gone into the possession of the distributors or dealers and the new vehicle had gone into the possession of the purchaser. At the point of time when this happened the finance company had not formally accepted the hiring agreement. That company then renounced or refused the proposal and the distributors took back or repossessed the new vehicle. In this state of affairs Crawford J. has held that the property in the new vehicle passed, a cheque for the balance of purchase money having been offered to the distributors who refused it. On the basis that the property passed to the intending purchaser, who is the plaintiff in the action, his Honour gave judgment in the form already described against the distributors, who are the defendants.

It is necessary to state the facts more in detail. The defendant appellant is City Motors (1933) Pty Ltd whose business in Hobart is to sell new motor vehicles. It is a subsidiary company or off-shoot of Perpetual Insurance and Securities Limited whose business in Hobart includes hire purchase finance of motor vehicles. That company is not a party to the proceedings. The plaintiff respondent is Southern Aerial Super Service Pty Ltd ("Super" is an abbreviation of "superphosphate", not a claim to the superiority of the service). It is a company carrying on operations at Campania, a farming district about thirty miles from Hobart, where it is represented by one Gangell, its managing director. He decided that the company should buy a new truck and trade in an old one. He communicated with the defendant company whose sales manager sent up two salesmen to inspect the truck to be traded-in. Next day they returned with a new Thames diesel truck which Gangell was agreeable that his company should buy. They placed the vehicle to be traded in under tests and, with one qualification, expressed themselves as satisfied; but they did not come to terms with Gangell who then went down to Hobart to see the sales manager. After some discussion in the course of which Gangell held out prospects of purchasing one or more vehicles later on, the sales manager agreed to sell the new truck for PD2,700 and to take the old truck as a trade-in at PD1,450 against that price. The qualification of the salesmen about the trade-in is not clearly explained. According to Gangell the sales manager said that (according to them) there was a little crack in the back of the cab and a noise in the cam shaft. At all events it was met by an agreement on the part of Gangell expressed in a letter addressed to the defendant company as follows-"Arising from an appraisal and general inspection [of the trade-in vehicle] I am prepared to authorize you to undertake such remedial action to rectify any fault that may be found with the motor overhead cam gear this [sic] reconditioning of the cab: this total expense is not to exceed the sum of PD50. Costs incurred to be debited to my account."

The sales manager asked whether Gangell wanted terms saying "We are allowing you PD1,450 on your vehicle leaving a balance of PD1,250 to be financed. How are we going to handle this?" According to him Gangell answered "Put it through the P.I.C. I have done business with them before." According to Gangell he answered that he could get terms down town. The sales manager then asked would Gangell let their firm have it; it would be some help and "they were carrying their own both combined". Crawford J. found that Gangell said that he could arrange terms for himself but was persuaded by the sales manager against doing that and agreed that an attempt should be made to obtain terms from Perpetual Insurance and Securities Limited. The sales manager then telephoned to Perpetual Insurance and Securities Limited, described the transaction and told Gangell it was "O.K.". Two instruments complying with the Hire Purchase Act, 1959 (Tas.) were filled in. The first consisted in the summary of financial obligations under the proposed hire purchase agreement and the second the agreement itself. The latter took the form of an offer by the plaintiff company to Perpetual Insurance and Securities Limited to hire the goods described therein, that is to say the Thames diesel truck. The form contained elaborate conditions but the two matters of importance are that it is expressed as an offer and that it states the "cash price", the insurance and the "terms charges". The like statement was contained in the "summary of financial obligations". That document stated that the cash price of the goods was PD2,700, the terms charges were PD196 12s. 0d., the insurance for one year PD56 and the total amount including the deposit of PD1,450 was PD1,502 12s. (an error for PD2,952 12s. 6d.) and the difference between the cash price of the goods and the total amount the buyer would have to pay was PD252 12s. 6d. The hire purchase instalments were to be thirty in number and PD50 1s. 9d. each in amount, payable monthly. The sales manager obtained for Gangell on the telephone at Campania the latter's driver so that he could inform him that the new Thames diesel truck could be put into use next day. Gangell signed the documents and returned to Campania. On the following day the two salesmen came and drove away the trade-in truck, leaving the plaintiff company in possession of the new truck which was already in use. Half-an-hour later they reappeared and said that they had had an accident. According to Gangell one of them said "I was a bit late. I was hooling the truck along and something started to rattle in it. Would you come to look at it?" Gangell went accordingly: he says that he found metal for about three chains down the road and that the engine was damaged. The question whether the fault lay with the salesmen or with the vehicle was not investigated at the trial, where it was not treated as relevant. The vehicle was towed to Hobart and placed in the defendant company's garage or yard. That was a Friday. On the telephone the sales manager told Gangell that Perpetual Insurance and Securities Limited had refused to accept the hire purchase agreement. Gangell said he would come to Hobart and pay cash for the new truck, meaning the balance of PD1,250. He could not of course do that until the Monday, business houses being closed in the meantime. Two representatives had been sent to Campania by the defendant company to take possession of the new truck but the protest of Gangell led to their recall that night. However two men armed with a written authority from the defendant company came to Campania on Monday and by means of the authority persuaded the driver of the Thames diesel truck in the absence of Gangell to surrender it to them. The driver had no authority to do any such thing and it was known by the sales manager that Gangell violently objected to giving the truck up. It is to be presumed that the men sent to take it knew this too. They drove the truck back to Hobart where it has been retained by the defendant company. On the same day Gangell offered the sales manager to pay the sum of PD1,250 in cash and next day his solicitor sent his cheque for that amount with a letter demanding the return of the new vehicle. The cheque was returned and the request was refused. It is necessary only to add that reasons lying in Gangell's slowness to pay off instalments in prior dealings with Perpetual Insurance and Securities Limited were put forward as a justification for the refusal to accept the hire purchase agreement, but there can be little doubt that the operative reason was the break down of the trade-in vehicle. This was not contested by the appellants' counsel before this Court. Upon this state of fact Crawford J. adopted the view that a sufficient tender had been made to the defendant company of the sum of PD1,250 and that thereupon the property in the Thames diesel truck passed to the plaintiff company, which thus could sue in detinue.

This view necessarily means that the proposed hire purchase agreement was simply a subordinate means for carrying out a purchase at PD2,700 of which PD1,450 had been discharged by delivery of the trade-in vehicle and PD1,250 remained to be paid either by means of a hire purchase agreement with a finance company or as a cash payment in money.

The case is a difficult one but in the end the determination of the rights of parties must depend upon ascertaining their expressed and implied intentions as embodied in their bargain and of course applying the appropriate legal rules. It seems clear enough that, but for the desire that the PD1,250 forming the residue of the price should be paid by instalments secured by a hire purchase agreement, there would have been an executed contract by which the property in the trade-in vehicle passed to the defendant company and the property in the Thames diesel truck passed to the plaintiff company and the PD1,250 was paid, or else left outstanding as a debt for an executed consideration. But the desire to secure the amount of PD1,250 by a hire purchase agreement under which that sum was payable by instalments made it inevitable that the property in the Thames diesel truck should not pass to the plaintiff company. It must be vested in the hire purchase finance company and if, pending the acceptance of the hire purchase proposal whether by Perpetual Insurance and Securities Limited or by some other body prepared to finance the residue of the price, the property in the Thames diesel truck were to pass to the plaintiff company, the subsequent hire purchase agreement would be invalid as an unregistered bill of sale. We may therefore begin with the position that property in the new diesel truck was not to pass to the plaintiff company until it had been fully paid for. But clearly that company was to become the immediate bailee of the new truck and to put it forthwith into working use. Further the trade-in truck was to be handed over to the defendant company at once. What did all this mean? For the defendant appellant it is contended that the bargain was all subject to an implied condition that if Perpetual Insurance and Securities Limited refused the proposal for the hire purchase agreement the whole transaction lapsed or failed or was at once nullified. This does not seem to be the correct inference. Several considerations tell strongly against it. In the first place there were other finance companies and the manner in which Perpetual Insurance and Securities Limited was chosen does not warrant the assumption that the choice was an essential element in the transaction; it was a subsidiary matter. In the next place the trade-in truck was handed over at once to the defendant company, a car dealer and distributor, without any express reservation: as dealers they might deal with it as they chose and without delay. Then it must be remembered that both parties believed that Perpetual Insurance and Securities Limited had committed itself, although informally, to the transaction. Again the new Thames diesel truck was handed over to the plaintiff company to be put into immediate use as a necessary part of its plant and the sales manager of the defendant company was told of the need for going on without a gap.

In all these circumstances the true inference appears to be that the manner in which the PD1,250 was found was a subsidiary and not an essential matter and that the new truck was received upon a bailment which could not be terminated without sufficient default on the part of the plaintiff respondent, while property in the trade-in truck passed at once unconditionally to the defendant company, on that company's men taking delivery of it and driving it away. There is no suggestion that any deception as to the state of the vehicle was practised upon the defendant company or its men or that there was any breach of condition as to its state of repair. The risk in respect of that vehicle seems to have passed to the defendant company before the vehicle sustained the damage or broke down.

The possession of the plaintiff company of the Thames diesel truck as bailee was exclusive and in obtaining possession of it from the driver against the strongly expressed will of Gangell the defendant company committed a trespass to goods. That this may be so notwithstanding that the trespasser is the bailor appears to be shown by the cases discussed in his work Bailment in the Common Law (1952) by Sir George Paton under the head of "Theft by Owner from the Bailee". see s. 96 p. 444. The bailment seems clearly not to have been at will and the plaintiff company had made no default nor committed any act justifying its termination. There seems to be no reason why the bailee with an immediate right to possession should not maintain detinue against the bailor if the bailor is clearly entitled only "in reversion". To take the further step of saying that the tender of the PD1,250 on the Monday or Tuesday, assuming the tender by cheque to have been valid, resulted in the passing of the property, that is to say the "general property", in the Thames truck to the plaintiff company may be possible: in part it depends on the view that the agreement between the parties involved payment of the price in a lump sum on the failure of the attempt to obtain the acceptance of the hire purchase agreement proposed, in part on adopting the view of the law for which there appears to be good American authority (see Corpus Juris Secundum Sales vol. 78, s. 571, p. 288 and Williston on Sales Rev. ed. (1948) vol. 2, s.331, p. 288) that tender of the price under an agreement to sell a specific chattel though unjustifiably repudiated by the seller may result in the property passing. But this point can be left undecided.

It is proper to note that the defendant company had renounced the agreement and although the renunciation could not be effective, since it was not accepted, to terminate the contract, it meant that the owner no longer possessed an intention to transfer property and he did not actually receive the purchase money. Hunter v Rice ^[F5] , so far as has been discovered, is the only reported case where a rejected tender of the balance of the price might have been relied upon as a ground for holding that the property had passed. It was not an agreement to sell but an award given under a submission to arbitration. The award required that a tenant named Sharpe should give up a farm including a stock of hay straw and manure on payment of a certain sum. It was held that the award did not vest the property. The tender of the money which was rejected was not given the force of payment. Lord Ellenborough at one point in his judgment said "If indeed Sharpe had accepted the money tendered, that would have been a ratification of the award, and an assent on his part to the transfer of the property; but without that I cannot conceive that the property was transferred by the mere force of the award" ^[F6] . Perhaps Lord Ellenborough would have distinguished an agreement to sell, although ex hypothesi it could not of its own force pass the property and although the purchaser had renounced performance. But it rather looks as if tender would not have been considered enough for the purpose. However what has been already said seems enough to establish the conclusion that had this action been framed in contract the plaintiff company must have recovered unliquidated damages. It is in fact framed in detinue and the question is whether the plaintiff company's title to possession as bailee is sufficient to support that form of action.

It must be steadily borne in mind that the Thames diesel truck was in the possession of the plaintiff company as bailee and the vehicle was wrongfully taken out of that company's possession. The right asserted is simply to regain possession, not to establish a possession not before held. The title of the bailee persists: nothing has happened to destroy or impair it. It follows that he may sue in detinue. The owner or bailor who wrongfully took it from the bailee's possession is compellable to restore it. There is much to be said for the view that in the circumstances a judgment to be enforced by a writ of delivery would have been more appropriate, a judgment leaving the defendant company to its cross action for the balance of the price and if there be default in payment any remedies arising thereout. That of course assumes that enforcement of such a writ remains possible. But as there has not been a specific objection to the alternative form of judgment it is better to allow it to stand, notwithstanding the misgivings one may feel as to the amount of the damages named as an alternative to restoring the chattel.

The appeal therefore should be dismissed.