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England and Wales Court of Appeal (Civil Division) Decisions
You are here: BAILII >> Databases >> England and Wales Court of Appeal (Civil Division) Decisions >> Gerson (Leasing) Ltd v Michael Wilkinson & Anor [2000] EWCA Civ 250 (31 July 2000)
URL: http://www.bailii.org/ew/cases/EWCA/Civ/2000/250.html
Cite as: [2000] EWCA Civ 250, [2001] 1 All ER 148, [2000] CLC 1720, [2001] QB 514, [2000] 2 All ER (Comm) 890, [2000] 3 WLR 1645
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Case No: QBENF 1999/0456/3
IN THE SUPREME COURT OF JUDICATURE
COURT OF APPEAL (CIVIL DIVISION)
ON APPEAL FROM QUEEN'S BENCH DIVISION
LIVERPOOL DISTRICT REGISTRY
His Honour Judge Kershaw QC
Royal Courts of Justice
Strand, London, WC2A 2LL
Date:
31st
July 2000
LORD JUSTICE PILL
LORD JUSTICE CLARKE
and
MR JUSTICE BENNETT
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MICHAEL GERSON (LEASING) LIMITED |
Claimant/ | |
- and - |
||
(1)
MICHAEL WILKINSON |
Defendants/ |
(Transcript of the Handed Down Judgment of
Smith Bernal Reporting Limited, 190 Fleet Street
London EC4A 2AG
Tel No: 020 7421 4040, Fax No: 020 7831 8838
Official Shorthand Writers to the Court)
- - - - - - - - - - - - - - - - - - - - -
Sir Roy Goode QC and Mr Peter J Goodbody (instructed by Hill Dickinson appeared for the Claimant/Appellant)
Mr Paul Chaisty (instructed by Apfel Carter appeared for the first Defendant/Respondent)
Mr Michael Lerego QC and Miss Linden Ife (instructed by Lester Aldridge appeared for the second Defendant/Respondent)
Judgment
As Approved by the Court
Crown Copyright ©
LORD JUSTICE CLARKE:
Introduction
1. This is an appeal by the claimant ("Gerson") from an order of His Honour Judge Kershaw QC made on the 17th December 1998 in the Mercantile List of the Liverpool District Registry in which he dismissed Gerson's claim for damages for conversion against both defendants ("Wilkinson" and "State"). The dispute relates to the ownership of various items of heavy plant and machinery. Gerson and State are both finance companies who both purchased the same equipment from a company called Emshelf IX Limited ("Emshelf").
2. On the 10th March 1995 Emshelf sold equipment to Gerson for about £425,000 under a sale and leaseback agreement under which Emshelf remained in physical possession of it. I shall call that equipment "the goods". Subsequently, without the authority of Gerson, on the 19th August 1996 Emshelf sold part of the same equipment to State, also under a sale and leaseback agreement. I shall call that equipment "the schedule 3 goods" because it is identified in schedule 3 of the statement of claim and has been so described in the course of the argument. All the goods including the schedule 3 goods remained in the physical possession of Emshelf. The judge held that the effect of that transaction was that State became the owner of the schedule 3 goods by reason of section 24 of the Sale of Goods Act 1979. Gerson challenges that conclusion on this appeal. There was no suggestion at the trial that State was aware that Emshelf did or might not own the schedule 3 goods.
3. Emshelf did not maintain the payments due under the lease from Gerson. As a result, on the 25th February 1997 Gerson terminated the lease. No-one suggests that it was not entitled to do so. The judge held that on the 28th February 1997 Gerson sold the goods for £319,000 to Sagebush (1997) Limited ("Sagebush"), which was represented at that time by Mr Nigel Smith. Gerson challenges that finding, which is essentially a finding of fact. The judge further held that property in the goods passed to Sagebush when the contract was made. Gerson challenges that conclusion too, saying that if (contrary to its case) a contract was made on the 28th February, the property in the goods was only to pass to Sagebush on payment and that, it being common ground that Sagebush did not at any stage pay for the goods, the property in them never passed to Sagebush.
4. The judge further held that if Sagebush agreed to buy the goods from Gerson but, contrary to that conclusion, property in the goods did not pass to Sagebush under the contract, Sagebush nevertheless obtained possession of the goods under the contract with the consent of Gerson as the seller and subsequently passed a good title to Wilkinson by reason of section 25 of the Sale of Goods Act 1979. Gerson challenges both those conclusions. It submits that Sagebush was at no stage in possession of the goods, whether under a contract of sale with Gerson or at all and that, even if it was, it was not in possession of the goods with Gerson's consent.
5. On the 4th March 1997 State terminated the lease with Emshelf for non-payment of instalments due under it and at about the same time it sold the schedule 3 goods to Sagebush, which in turn sold all the goods to Wilkinson on various dates between the 3rd and the 12th March. There is no suggestion Wilkinson was other than an entirely innocent buyer.
6. It is not necessary to spell out in detail the precise arrangements to which Wilkinson was a party for this reason. It is I think agreed that if Sagebush bought all the goods from Gerson and the property in them passed to Sagebush, the sale or sales of the goods to Wilkinson passed the property to him. It is further agreed that if there was a contract between Gerson and Sagebush and, if Sagebush obtained possession of the goods under that contract with the consent of Gerson, the subsequent sales to Wilkinson had the effect of passing the property to him under section 25 of the 1979 Act. On the other hand, if Wilkinson did not obtain a good title by one of those routes, it is, as I understand it, common ground that, if State obtained a good title to the schedule 3 goods, that title was passed to Wilkinson through Sagebush. In that event Wilkinson would be liable to Gerson for conversion in respects of the the goods other than the schedule 3 goods.
7. The issues in the appeal may be considered under three headings, namely section 24 of the Sale of Goods Act 1979, the contract between Gerson and Sagebush and section 25 of the 1979 Act. I shall consider them in turn.
Section 24 of the Sale of Goods Act 1979
8. Section 24 of the 1979 Act provides, so far as relevant:
"Where a person having sold goods continues or is in possession of the goods, or of the documents of title to the goods, the delivery or transfer by that person ... of the goods or document of title under any sale ... to any person receiving the same in good faith and without notice of the previous sale, has the same effect as if the person making the delivery or transfer were expressly authorised by the owner of the goods to make the same.
State's case is that Emshelf was a person who sold goods and continued in possession of goods because it sold goods to Gerson and retained possession of them and that Emshelf later delivered the goods to State under a contract of sale with State, who received them in good faith without notice of the sale to Gerson.
9. It is not in dispute that Emshelf sold the goods to Gerson and remained in possession of them under the sale and leaseback agreement. Nor is it in dispute that on the evidence available at the trial, if State received the goods, it did so in good faith and without notice of the sale to Gerson. The issue between the parties is whether Emshelf delivered the goods to State under a sale. This is a crucial point because, subject to an application on the part of Gerson to adduce further evidence, to which I shall return in due course, it is common ground that if Emshelf did deliver the schedule 3 goods to State under a sale, State obtained good title to them and subsequently passed it to Wilkinson, with the consequence that neither State nor Wilkinson converted those goods.
10. Before considering the meaning of delivery in section 24 I should note that State at one time said that it would contend that there was a relevant transfer within the meaning of the section, but Mr Lerego QC abandoned that suggestion on behalf of State in the course of the argument. As to delivery, Sir Roy Goode QC expressly accepted on behalf of Gerson, at least for purpose of this appeal, that delivery in section 24 includes constructive delivery and that it is not confined to physical delivery. In my view (albeit expressed obiter because neither point was argued) both concessions were correctly made. They accord with the decision of the High Court of Australia in Gamer's Motor Centre (Newcastle) Proprietary Limited v Natwest Wholesale Australia Proprietary Limited (1987) 163 CLR 236, which I followed at first instance in Forsythe International (UK) Limited v Silver Shipping Co Limited [1994] 1 WLR 1334.
11. It is thus common ground for the purposes of this appeal that delivery can be constructive, although delivery under the section requires a voluntary act by the person in possession because by section 61(1) of the 1979 Act, unless the context or subject matter otherwise requires, `delivery' means `voluntary transfer from one person to another'. That was an essential part of the decision in Forsythe, which I understood to be accepted by both Sir Roy and Mr Lerego. Whether there was constructive delivery here depends upon what is meant by constructive delivery and whether there was such delivery on the facts.
12. In the 5th edition of his work entitled Sale of Goods Act 1893, which was published in 1902, Chalmers said this:
"Delivery may be actual or constructive. Delivery is constructive when it is effected without any change in the actual possession of the thing delivered, as in the case of delivery by attornment or symbolic delivery. Delivery by attornment may take place in three classes of cases. First, the seller may be in possession of the goods, but after sale he may attorn to the buyer and continue to hold the goods as his bailee. Secondly, the goods may be in the possession of the buyer before sale, but after sale he may hold them on his own account. Thirdly, the goods may be in the possession of a third person, as bailee for the seller. After sale such third person may attorn to the buyer and continue to hold them as his bailee".
That passage was discussed in both Gamer's case and Forsythe (see eg pages 245 and 1346 respectively). In Gamer's case the question for decision was whether there was a change in the character of the relevant possession which amounted to a constructive delivery to a third party, namely Natwest. In Forsythe one of the questions was essentially the same, although the facts were of course different.
13. Both Sir Roy and Mr Lerego submitted that the instant case is on all fours with Gamer's case and indeed Forsythe. However, in my judgment it is not. In both those cases the constructive possession being considered was the kind of possession envisaged by section 1(2) of the Factors Act 1889, which provides so far as relevant:
"For the purposes of this Act ... (2) A person shall be deemed to be in possession of goods or of documents of title to goods where the goods or documents are in his actual custody or are held by any other person subject to his control or for him or on his behalf".
In Forsythe I held, consistently with Gamer's case, that possession within the meaning of section1(2) of the Factors Act would also be possession within the meaning of section 24 of the Sale of Goods Act 1979 and that on the facts the charterers were in possession of bunkers after the determination of a charterparty because from that time the owners were holding them subject to the charterers' control or on their behalf : see page 1344D to E and the discussion of the relevance of the Factors Act at pages 1344E to 1345C.
14. There was considerable debate during the course of the first part of the argument in this appeal as to whether on the facts of Gamer's case the dealer was holding the cars on behalf of and subject to the control of Natwest. Sir Roy submitted that it was whereas Mr Lerego submitted that it was not. Before the end of the argument it was ascertained that the dealer was indeed holding the cars on behalf of and subject to the control of Natwest because the report of the case in the Court of Appeal of the Supreme Court of New South Wales in [1985] 3 NSWLR 475 shows that the contract between the dealer and Natwest (then Lombard) included an express provision that Lombank or its authorised agents `may at any time take possession of any unit without notice'. When that report came to light Mr Lerego properly conceded that Natwest was in constructive possession of the cars which were in the actual custody of the dealer because of the control exercised by Natwest under the contract.
15. Mr Lerego submitted that the majority of High Court did not put their decision on that basis because none of the judges referred to the clause, but in my judgment that was the basis of the decision: see for example per Dawson J at page 263. In these circumstances I do not think that it is necessary to consider the facts of either Gamer's case or Forsythe in any detail. They were both cases where A was held to be in possession of property in the actual custody of B because of the nature and extent of the control which A exerted over the property. The instant case is not such a case, at any rate after the leaseback by State to Emshelf. Thereafter Emshelf was holding the schedule 3 goods in its own right as lessee of State. State had no control over the goods at that time. It was not in the same position as Nat West in Gamer's case or of the charterers in Forsythe.
16. As I see it the analysis here is somewhat different. The way in which State puts its case can be summarised as follows, by reference (at least in part) to a helpful note supplied by Mr Lerego.
(i) Emshelf sold the schedule 3 goods to State, which leased them back to Emshelf under a contract of hire, which is a form of bailment.
(ii) State could not lease the schedule 3 goods to Emshelf unless it both owned them and was entitled to possession of them.
(iii) State's ownership of the goods was expressly recognised by clause 4 of the lease.
(iv) State's right to possession and thus to transfer possession to Emshelf was either an express term of the lease or was an implied term of it by reason of section 7 of the Supply of Goods and Services Act 1982.
(v) State could only discharge its obligation to transfer possession of the schedule 3 goods to Emshelf under the lease if there was a delivery, albeit constructive, by Emshelf to State.
Mr Lerego submits that constructive delivery of that kind is recognised by both the textbooks and the authorities.
17. I accept Mr Lerego's analysis of the facts. The precise contractual position is not entirely clear but it is sufficient to enable reasonably firm conclusions to be reached on the critical questions. It is common ground that the sale of the schedule 3 goods by Emshelf to State and the leaseback by State to Emshelf were both part of one transaction. Thus the sale would not have taken place without the leaseback and the leaseback could not of course have occurred without the sale.
18. There is no clear evidence of the sale, which is evidenced only by an invoice dated the 19th August 1996 and the agreement by way of leaseback which is signed by both parties and dated the 28th August 1996. The invoice simply states that the buyer is State and that the seller is Emshelf and sets out the nature of the goods and the price, which was £168,025 inclusive of VAT. State only paid the price on signature by Emshelf of the lease. The lease is between Emshelf as lessee and State as lessor. On the first page of the lease there are set out the period of hire and the rent and in a box just above the signatures of two directors on behalf of Emshelf, Emshelf stated:
"We wish to hire the goods for the purpose of a business carried on by us and request you to buy the goods from the supplier named above for this purpose.
We did not rely on your judgment but relied on our own judgment in selecting the goods. We understand we are responsible for taking delivery of the goods on the date of this Agreement. We shall accept delivery of the goods at the address shown above and we shall carefully examine and test the goods before accepting them and establish that they are suitable for our purposes.
Mr Lerego points to the fact that Emshelf was promising to take delivery of the schedule 3 goods. I accept his submission that such delivery could only be taken from State and, moreover, that State would only have the right to deliver them to Emshelf if Emshelf had (at least notionally, symbolically or constructively) delivered them to State.
19. There are other terms of the lease which confirm that view. Thus the agreement is expressed to be a leasing agreement and expressly provides for a hiring which by clause 1a is expressed to commence on the date that the lease is signed. Clause 2 sets out the lessee's responsibilities in detail and includes, for example, in clause 2h a term that the leasee shall:
"Not assign sub-let pledge mortgage charge or sell the goods or any part thereof nor abandon or part with possession or the control of the goods or any part thereof or the benefit of this agreement or attempt to do such things nor allow any other person or persons to obtain any lean or charge upon the goods or allow to be done any other thing which in State Securities opinion may prejudice or jeopardise its rights of ownership thereto.
Clause 4 provides:
"the goods shall all times remain the property of State Securities and nothing herein contained or otherwise communicated to the leasee in writing or orally shall be construed to imply that ownership of the goods will or may pass under any circumstances to the Lessee
RISK IN THE GOODS WILL PASS TO THE LEASEE ON THE DATE OF THIS AGREEMENT".
The agreement contains a number of provisions which are typical in a lease.
20. In my judgment the lease is consistent only with ownership of the schedule 3 goods by State and with a right of possession in State sufficient to transfer possession to Emshelf under the lease. That is explicit or implicit in the terms of the lease. In any event section 7(1) of the Supply of Goods and Services Act 1982 provides:
"In a contract for the hire of goods there is an implied condition on the part of the bylaw that in the case of a bailment he has a right to transfer possession of the goods by way of hire for the period of the bailment and in the case of an agreement to bail he will have such a right at the time of the bailment".
By section 11(1) that implied term can be negatived or varied by express agreement, or by the course of dealing between the parties or by such usage as binds both parties to the contract. However, no such express agreement, course of dealing or usage has been suggested in this case. It follows that State had a right to transfer possession to Emshelf.
21. The question is whether in these circumstances there was constructive delivery of the schedule 3 goods by Emshelf to State so that State could deliver them to Emshelf under the lease. Mr Lerego submits that there was just such a constructive or (as it is sometimes put) symbolic delivery and relies upon statements both in textbooks and in the authorities.
22. As to the textbooks, he relies in the first place upon An Essay on Possession in the Common Law by Pollock and Wright published in 1888. In section 7 of chapter II beginning at page 71 Pollock & Wright discuss `Delivery of goods by attornment'. At pages 72-3 they say this:
"The authorities both on acceptance and actual receipt within the Statute of Frauds and on the rights of unpaid vendors show that in several ways there may be a change of possession without any change of the actual custody. Such a change of possession is commonly spoken of as constructive delivery.
1. A seller in possession may assent to hold the thing sold on account of the buyer. When he begins so to hold it, this has the same effect as a physical delivery to the buyer or his servant, and is an actual receipt by the buyer; and this whether the vendor's custody is in the character of a bailee for reward or of a borrower. The important thing is his recognition of the purchaser's right to possess as owner, and his continuing to hold the goods either as the purchaser's servant or as his bailee with a possession derived from that right. On the other hand, acts of the buyer which treat the seller as his agent or bailee are evidence of receipt and acceptance as against the buyer: though payment of warehouse rent, for example, to an unpaid vendor retaining the custody of the goods is far from conclusive to show that he has lost possession and his lien. Accordingly as the seller holds as servant or bailee, the transaction amounts to simple delivery, or to deliver to the buyer immediately followed by redelivery to the seller as bailee.
2. Possession may be delivered, while the goods are in the custody of a third person, by the agreement of the seller and buyer, with the assent of that person, that they shall be held in the name or on account of the buyer. This is described by the modern authorities as an `agreement of attornment.'
...
3. Lastly, it is a possible though not very common case that the buyer is in possession of the goods as the seller's bailee."
23. Mr Lerego submits that the facts here are essentially those contemplated in paragraph 1 of that extract. He also relies upon the following statement in paragraph 8-170 of the 16th edition of Bowstead & Reynolds on Agency:
"Attornment. An attornment in respect of goods occurs where the possessor of goods, whether himself the transferor or the bailee of the transferor, acknowledges that he holds, and possesses, for another. There is authority that such an attornment creates a fresh bailment by means of a constructive delivery and redelivery.
24. As to the authorities, Mr Lerego relies in particular upon Marvin v Wallace (1856) 25 LJQB 369, which is cited by Pollock & Wright and upon Dublin City Distillers Limited v Doherty [1914] AC 823, 852, which is the first authority cited by Bowstead in the above passage.
25. In Marvin v Wallace the question was whether the buyer of a horse had received it for the purposes of compliance with section 17 of the Statute of Frauds 1677. The seller sold the horse to the buyer and then, after that contract had been made, asked the buyer if he could borrow it for a time. The buyer said that he could, provided that he took care of it. As I read the facts, the loan was to be for a specific period, so that it was not a bailment at will. The horse remained in the physical possession of the seller. The question was whether the buyer had received the horse. It was held that he had. Coleridge J said (at page 370):
"The 17th section of the Statute of Frauds requires an actual receipt of the goods, which implies a delivery of the goods on the one hand and an acceptance of the goods on the other hand. It is admitted that, if for one minute they are in the actual visible possession of the vendee, as vendee, it would be sufficient; also; it must be admitted, that if they were in the possession of a third party, for and on behalf of the vendee, the statute would be satisfied. But it is contended that, unless some act was done entirely unambiguous, indicating a change of possession, the question as to the intention of the vendee to accept cannot arise. The jury have found that the bargain for the purchase of the horse was complete, and then the vendor asked the vendee as a favour to lend the horse to him for a certain time and special purpose: the vendee said, "Yes", I will lend him to you, if you will take care of him"; and in consequence of that the vendor retained apparent possession of the horse and made use of it as bailee, and at the end of the time agreed upon returned it to the vendee. It appears to me that the statute has been satisfied. Try the case on the first point, whether there has been a sufficient delivery. Elmore v Stone furnishes an answer: there the horse was passed from one stable of the vendor to another stable of a different character. Though the vendor had as much possession of the horse when in the one as in the other, the character in which he held it was changed. Here, though the defendant had the same apparent possession of the horse, the evidence shews that the character of the possession was entirely changed. He ceased to hold it as owner, and continued to hold it only as bailee. As to the question, whether the right of lien has been retained by the vendor, it is only a consequence of the other point. If the bargain is complete, and the possession has passed, the right of lien is gone; and if not, it is retained. I think, therefore, that question cannot be used as a test of the character of the possession.
Erle J, Crompton J and Lord Campbell CJ gave judgments to similar effect.
26. The crucial point for present purposes is that the court treated the horse as having been delivered to the buyer. The delivery occurred because the buyer loaned the horse to the seller and the seller acknowledged that he was holding the horse, not as seller, but as bailee. Erle J put it in this way, at page 371:
"There must be an actual contract of purchase and sale; and then, if the buyer exercises any act of ownership, though by words only, inconsistent with any other supposition than that he intended to assume dominion over the chattel as owner, he has accepted and actually received it within the meaning of the statute. Applying that doctrine to the facts of this case, according to the finding of the jury, the defendant, as owner in possession of the horse, permitted the plaintiff to take and ride it for two or three journeys. That is a decided transmutation of possession, and so the plaintiff's lien was gone, and the requirements of the Statute of Frauds complied with.
27. The passage from the Dublin City Distillers' case relied upon by Bowstead is in the speech of Lord Parker at page 852:
"The respondent contends that these documents operate by way of pledge. It is quite certain that at common law a pledge cannot be created unless possession of the goods the subject of the pledge be delivered to the pledgee. When the goods in question are in the actual possession of the pledger, possession of them is, as a rule, given to the pledgee by actual delivery of the goods themselves. There are, however, cases in which possession may pass without actual delivery, for example, whenever there is some agreement between the parties the effect of which is to change the possession of the pledger from a possession on his own account as owner into possession as bailee for the pledgee: see Meyerstein v Barber LR 2 CP 38. Such an agreement operates as a delivery of the goods to the pledgee and a redelivery of the goods by the pledgee to the pledger as bailee for the purposes mentioned in the agreement. A mere book entry cannot, however, have that effect.
28. In my judgment the legal position is as set out by both Pollock & Wright and Bowstead. Thus, where a seller in possession of the goods sold acknowledges that he is holding the goods on account of the buyer in circumstances where (as Pollock & Wright put it at page 72) he recognises the purchaser's right to possess as owner and his continuing to hold the goods thereafter as the bailee with a possession derived from that right, then (as Pollock & Wright put it at page 73) the transaction amounts to delivery to the buyer immediately followed by redelivery to the seller as bailee and that is so whether the seller's custody is `in the character of a bailee for reward or of a borrower'. There is a change of the character of the seller's possession when he holds the goods for the buyer and, indeed, when he subsequently becomes, say, the bailee from the buyer for reward.
29. Mr Lerego submits that an application of those principles establishes a delivery by Emshelf to State and a redelivery by State to Emshelf. Sir Roy Goode, on the other hand, submits that the facts of this case are distinguishable from those in Marvin v Wallace because in that case the contract of sale was made before the horse was loaned to the seller whereas here the sale and leaseback were all part of one agreement. He further submits that there was no acknowledgment here by Emshelf of State's right of possession of the schedule 3 goods and no sufficient voluntary act of delivery by Emshelf to State. As he put it in argument, there was no time at which State could instruct Emshelf what to do with the goods and thus no time at which State could decide whether or not to lease the goods to Emshelf. For example, State could not at any stage have instructed Emshelf to deliver the goods to it or to a third party on its behalf.
30. It is true that there was no identifiable moment at which State could have given those instructions. However I prefer the submissions of Mr Lerego to those of Sir Roy on this point. I do not think that it is necessary to identify a moment at which the goods were delivered to State by Emshelf. The effect of the sale and leaseback arrangement was that the goods must be taken to have been delivered to State because State could not otherwise have leased them back to Emshelf. Although on the facts of Marvin v Wallace the loan arrangement was made after the contract of sale, I do not think that in principle it would or should have made any difference if the sale agreement and the bailment had been contained in the same contract. I can see no reason why it should be held that there was a delivery and redelivery in the one case and not in the other.
31. Equally it seems to me that there was here an acknowledgment by Emshelf that it held the goods on behalf of State in the lease itself. I have already set out the relevant facts. The terms of the lease are consistent only with such an acknowledgment, since (as I have already stated) State would not otherwise have been able to lease the goods back to Emshelf. The principles set out above therefore seem to me to establish that there was a delivery and a redelivery on the facts here.
32. Sir Roy submits that there was no voluntary act of transfer and that State's case fails for that reason, as the owners' case failed in Forsythe. However, it seems to me that the making of the agreement for sale and the entering into of the lease was a sufficient voluntary act on the part of Emshelf to satisfy the requirement in section 61(1) of the Sale of Goods Act 1979 that in order to amount to `delivery' there must be a voluntary transfer of possession from one person to another.
33. Finally Sir Roy submits I think that the effect of the above analysis is to hold that State had possession in circumstances in which it would not have possession under section 1(2) of the Factors Act 1889. He further submits that if it would not have possession under that Act it should not be held to have received the goods within the meaning of section 24 of the Sale of Goods Act 1979. It is true that there are a number of cases in which it has been held that for many purposes the Factors Act 1889 and the Sale of Goods Act 1893 and its replacements should be treated as a code: see for example the discussion in Forsythe at pages 1344E to 1345B.
34. I am, however, unable to accept the submission that unless State's possession was possession within the meaning of section 1(2) of the Factors Act 1889 it cannot have received the goods within the meaning of section 14 of the 1979 Act. While such possession is sufficient to amount to receipt, the buyer can in my opinion receive the goods in the way which I have described. It seems to me that such receipt probably amounts to possession by State within the meaning of section 1(2) because, in order to lease them from State, Emshelf must have held the goods for State or on its behalf, albeit symbolically. However, if that is wrong, there was nevertheless a delivery and redelivery of the goods sufficient to amount to receipt of them by State.
35. Although the Factors Acts and the Sale of Goods Acts can for some purposes be regarded as part of a code, the definition in section 1(2) was not incorporated into the Sale of Goods Act 1893. As Mr Lerego pointed out, section 1(2) is expressed to be `for the purposes of this Act', that is the Factors Act 1889. Moreover, while the provisions of section 1(2) were not expressly incorporated into the Sale of Goods Acts, the provisions of section 1(1) were. Thus section 26 of what is now the Sale of Goods Act 1979 defines `mercantile agent' in the same terms as section 1(1) of the 1889 Act. In these circumstances I do not think that the question whether a buyer has received goods within the meaning of section 24 depends wholly upon whether he is in possession of the goods within the meaning of section 1(2) of the Factors Act 1889.
36. Finally, it seems to me that the conclusions set out above make sense in modern conditions. This and other cases show that purchase of goods is commonly financed by sale and leaseback arrangements such as those entered into by both Gerson and State in the instant case. It seems to me that it makes commercial sense to hold that such arrangements involve a transfer of constructive possession to the finance company who buys the goods and leases them back, such that the innocent finance company can take advantage of the provisions of section 24 of the 1979 Act. The distinctions suggested on behalf of Gerson seem to me to be too narrow to make commercial sense.
37. For all these reasons I would hold that, on the evidence before the judge, Emshelf delivered the schedule 3 goods to State under a sale and that State received them in good faith and without notice of the sale from Emshelf to Gerson. It follows that State acquired good title to the schedule 3 goods under section 24 of the Sale of Goods Act 1979 and that it is not liable for conversion. I would dismiss the appeal on this point.
Contract between Gerson and Sagebush.
38. The judge held that Gerson sold all the goods to Sagebush on the 28th February 1997. He held that Gerson offered to sell the goods by a fax dated the 27th February and that the offer was accepted by a reply fax of the next day. Those faxes must of course be considered in their context but, before considering the surrounding circumstances, it is appropriate to quote the faxes. The fax of the 27th February was sent by Mr Gerson of Gerson to Mr Smith of Sagebush; It was in these terms:
"I have spoken to Ken Grieg and am satisfied that they have no objection to a sale of the equipment leased to Emshelf even if the sale price appears to represent an apparent undervalue.
Accordingly I am willing to make an outright sale for £319,000 plus VAT.
This figure is made up of £269,000 (259,000 plus £10,000 interest as per termination statement) plus £50,000 (retention of 5% of sale proceeds under sales agency agreement under original lease based on estimated true market value of £1m.
Sagebush replied by fax on the next day in these terms:
"With reference to our various telephone consultations and your penultimate fax of yesterday.
Pleas supply an invoice in the sum of £319,000 plus VAT to Sagebush (1997) LTD in consideration of all that plant and equipment which was the subject of your terminated lease agreement with Elmshelf LTD.
Many thanks for your assistance in this matter.
39. The context in which those faxes came to be sent may be summarised as follows. As the judge explained, by the beginning of 1997 the payments due from Emshelf under the lease with Gerson were seriously in arrears. Mr Gerson had a meeting with Mr Joseph Hayes, whom he believed to be an adviser to and spokesman for Mr Greig, who was both a director of Emshelf and one of the guarantors of Emshelf's obligations under the lease. Mr Gerson also believed Mr Hayes to be a shadow director of Emshelf. Mr Hayes told Mr Gerson that there was an investor on the horizon who was interested in taking over Mr Greig's companies and investing money in them. Gerson terminated the lease on the 25th February 1997. Very soon after that Mr Smith telephoned Mr Gerson and introduced himself. Mr Gerson checked with Mr Greig and Ms Bean (who was also a director of Emshelf and the other guarantor of its obligations under the lease) whether Mr Smith was the person intending to put money into Emshelf and obtained their approval to a sale to Mr Smith or Sagebush Limited.
40. It was in these circumstances that Mr Gerson sent the fax of the 27th February to Mr Smith which I have quoted above. The goods were thought to be worth much more than the £319,000 plus VAT which Mr Gerson proposed to Mr Smith, but the amount outstanding on the lease, inclusive of all charges and VAT, as at the 25th February was £314,574.39. It was at least partly because of the potential difference between those figures and the figure of £1 million which the goods were said to be worth that Mr Gerson obtained the consent of Mr Greig and Ms Bean first to discuss with Mr Smith of Sagebush Limited the details of the lease and of the goods and then to make an arrangement with Mr Smith.
41. There is no evidence that there was any more extensive conversation between Mr Gerson and Mr Smith than as found by the judge and as described above. Thus Mr Gerson did not enquire of Mr Smith as to his or Sagebush's financial position. Nor did he carry out any investigation as to their creditworthiness. Moreover, he did not know whether Mr Smith had seen the goods and he did not provide him with a schedule of them. He had never done business with Mr Smith before.
42. In these circumstances Sir Roy Goode submits that it is almost inconceivable that Mr Gerson, as an experienced businessman, would have made an offer to sell the goods outright to Mr Smith on such terms that there would be a binding contract between them. He also says that Mr Gerson would certainly not have done so on the basis that property in the goods would pass to Mr Smith or his company immediately on acceptance and before the goods were paid for. Sir Roy further submits that it is equally inconceivable that Mr Smith would have agreed to buy and pay for the goods before he had made appropriate financial arrangements. Finally he submits that it is permissible to take these factors into account in deciding whether the faxes relied upon establish a contract between the parties.
43. I accept Sir Roy's submission that it is permissible to take account of the probabilities in deciding that question. I further accept his submissions as to the position of Mr Gerson. It does seem to me to be most unlikely that when he sent his fax of the 27th February he intended that an acceptance of it would lead to a binding contract, but, even if that is wrong, it is, in my judgment inconceivable that he intended that the property in the goods should pass by an acceptance of it. The position of Mr Smith is less clear. It is I suppose possible that he would have been willing to buy the goods without having finance in place because of the perceived difference between the price and the true values of the goods, but it seems more likely that he would have wanted to make financial arrangements to enable him to pay for them before committing himself or his company to do so.
44. All of course depends upon the true construction of the two faxes, together in principle with what was said in the telephone conversations and, perhaps, the last fax sent on the 27th February. Such a fax is referred to by inference in the fax of the 28th February quoted above because of the reference in it to "your penultimate fax of yesterday". Mr Gerson gave oral evidence but Mr Smith did not. Mr Gerson said in evidence that he had no knowledge of another fax sent on the 27th February and that he did not know what document was being referred to. Also he gave no evidence about the telephone conversations which were also referred to in the fax. We do not of course know what Mr Smith might have said if he had been called.
45. If the problem is approached as one of offer and acceptance, the first question is whether the fax of the 27th February is an offer which was capable of acceptance. In the light of the considerations outlined above, I would not hold that it was an offer which was intended to be accepted. It simply says that "I am willing to make an outright sale for £319,000 plus VAT". It is not couched in the terms of an offer and seems to me to be consistent with being an invitation to treat. However I recognise that it is capable of being regarded as an offer, in which case the next question is whether the fax of the next day was an acceptance. This is not an easy question to answer without any knowledge of the contents of either the telephone conversations or the other fax referred to in the reply fax.
46. The reply fax is not couched in terms of acceptance, but merely asks for an invoice. Also it was sent by Sagebush (1997) Limited and I am not sure that until then Gerson had any knowledge of such a company. However that may be, the fax can to my mind only be construed as an acceptance if the request for an invoice is an unequivocal acceptance of Gerson's offer to sell for £319,000 plus VAT and that it is a promise to pay that sum for whatever plant and equipment was the subject of the lease. I do not think that it is. It seems to me to be consistent simply with a request for an invoice setting out the relevant plant and equipment so that Sagebush could make financial arrangements to pay it, no doubt on the basis that if such arrangements were made the deal would become firm.
47. The contrary view is that the request for an invoice is consistent only with a promise to pay it. I do not think that the mere request for an invoice without any other evidence of agreement, whether by telephone or otherwise, amounts to an unequivocal acceptance. By way of example, I note that it is by no means clear that the invoice dated the 19th August 1986 form State to Emshelf is evidence of a binding agreement between them. On the contrary it appears to me to be probable that, notwithstanding the invoice, there was no binding agreement of sale and leaseback between Emshelf and State until the lease was signed on the 28th August. In these circumstances, if the reply fax is construed in its context and in the light of the surrounding circumstances which I described earlier, I do not think that it can fairly be regarded as an acceptance of an offer to sell the goods for £319,000 plus VAT. I have thus far reached that view on the basis of the events prior receipt by Gerson of the reply fax.
48. If, contrary to that view, the effect of the reply fax was to bring into existence a binding contract for the sale and purchase of the goods for £319,000 plus VAT, the next question is when the parties intended the property in the goods to pass. The judge held that there was an agreement on the 28th February and that the property passed when the contract was made. By section 17(1) of the Sale of Goods Act 1979, where there is a contract for the sale of specific or ascertained goods, the property passes when the parties intended it to pass and, by section 17(2), for the purposes of ascertaining the intention of the parties, regard shall be had to the terms of the contract, the conduct of the parties and the circumstances of the case. However, section 18 provides:
"Unless a different intention appears, the following are rules for ascertaining the intention of the parties as to the time at which the property is to pass to the buyer.
Rule 1 - Where there is an unconditional contract for the sale of specific goods, in a deliverable state, the property in the goods passes to the buyer when the contract is made, and it is immaterial whether the time of payment or the time of delivery, or both, be postponed."
49. On the assumption that a contract was made on the 28th February, the question is thus when the parties intended the property to pass taking account of the circumstances set out in section 17(2) and whether a different intention appears from that set out in section 18 rule 1. In my judgment a different intention does appear. It appears from all the circumstances of the case, even if attention is confined to events before the receipt by Gerson of the reply fax of the 28th February. It is to my mind inconceivable that Gerson intended to pass the property to Sagebush before it was paid. Moreover I do not think that Mr Smith can have thought otherwise. It is noteworthy in this regard that neither of the faxes contains a provision as to when delivery should take place. That seems to me to be a pointer to the absence of a contract, but if there was a contract, it is a strong pointer to the parties' intentions as to when property was to pass. No-one would have contemplated that immediately after sending the fax of the 28th February Sagebush was entitled to delivery of the goods without paying for them.
50. Assuming that it is permissible to take account of subsequent events in order to determine what the intentions of the parties were on the 28th February (which, although it is not necessary to decide the point for the purposes of deciding this appeal, to my mind it is), my conclusion is the same. Indeed, it is strengthened. Immediately after receipt of the reply fax Mr Rolls of Gerson faxed Mr Smith at Sagebush as follows:
"Emshelf IX Limited
Further to your fax of earlier this afternoon please find attached a copy of our invoice to yourselves for the sale of the plant and equipment formally subject to our lease agreement with the above.
The original invoice will be in the post for you tonight."
The invoice stated "Sale of second hand plant as declared in the attached schedule. As seen and approved for the agreed sum" of £319,000 plus VAT of £55,825.00 making a total of £374,825.00. Underneath was written "Title to this equipment will pass only upon payment of this invoice." Attached to the fax and the invoice were several pages on which the goods were set out in a schedule.
51. It is plain from that invoice, which was sent almost immediately after receipt of the reply fax, that it was Gerson's intention that property in the goods should not pass until payment, as I would have expected. It is inconceivable that that was not also his intention both when he sent the fax of the day before and when he received the reply fax. It is in my opinion almost certain that that was also the intention and understanding of Mr Smith, not only because that is what one would expect, but because subsequently, after the dispute arose he produced an invoice which had been doctored to remove the statement that title would pass only on payment. The judge held that that had been achieved by what he called skilful use of the photocopier. In the absence of any explanation from Mr Smith it is a reasonable inference from that conduct that Mr Smith knew perfectly well that title was not to pass until payment.
52. On the same day, after receipt of the invoice, Mr Smith telephoned to ask for Gerson's bank details and Gerson faxed the details to him immediately. According to the uncontroverted evidence of Mr Gerson there were thereafter a number of telephone conversations between himself and Mr Smith during which Mr Smith promised payment, but it never came. Mr Gerson denied that he demanded payment, but simply said that payment was promised. He said that if Mr Smith had paid there would be nothing to agree, which is plainly correct because the price had been agreed in the exchange of faxes and, if Sagebush had paid the price, there would have been nothing further to agree and Sagebush would in that event have become entitled to take possession of the goods. I shall return to my reasons for this view below.
53. The next written communication between the parties which we have seen was dated the 18th March 1997 in which Gerson faxed Mr Smith at Sagebush asking him to "contact us with regard to the settling of invoice L10590 for sale of plant to your company". On the same day Mr Gerson faxed Mr Greig and Ms Bean in these terms:
"At the end of February Nigel Smith of Sagebush asked us to send an invoice for the equipment leased to Emshelf at an agreed figure.
We understood that payment would be made promptly but over a fortnight has elapsed and payment has not been received.
It is our intention to withdraw the offer to sell to Mr Smith and collect the equipment and dispose of it elsewhere.
Do you know what Mr Smith's intentions are?"
The first of those faxes might suggest that an agreement for sale had been made, but the second refers to withdrawal of the offer and is thus consistent with the conclusion that no sale had been agreed.
54. On the 20th March Mr Gerson sent a similar fax and recorded delivery letter to Mr Smith at Sagebush in these terms:
"Some three weeks have elapsed since you originally asked for an invoice and details of our Bank account and you subsequently promised payment on several occasions including the definite assurance of payment to our Bank account yesterday.
Payment was not received and therefore the offer of sale of the plant and equipment formerly leased to Emshelf is now withdrawn and we have made arrangements with ... Savills ... to make arrangements to recover the plant and equipment and dispose of our interest in it by auction."
Mr Gerson said in evidence that he in fact instructed agents on the same day and it was also on the same day that he issued a credit note addressed to Sagebush in the sum of £374,825 in respect of "Cancellation of Invoice ... sale aborted".
55. Mr Gerson subsequently arranged to meet Mr Smith on the 26th March. Before the meeting he sent Mr Smith a fax asking him for a complete list of the equipment showing its present location. The meeting was held, but achieved nothing. Mr Smith did not tell Mr Gerson that he had sold the goods to Mr Wilkinson. There followed some later correspondence between solicitors, but it is not necessary to refer to it for the purposes of this appeal.
56. The judge referred to the fact that Mr Gerson maintained in evidence that there had been no sale by Gerson to Sagebush. The judge had earlier said that he had had the advantage of seeing Mr Gerson give evidence and that he had formed a very favourable impression of him. In the present context he said that he was sure that Mr Gerson honestly believed that there had been no sale to Sagebush. However, he correctly said that what matters is not his subjective intention or his belief, but an objective assessment of what was said and done. I entirely agree and, for that reason, have not set out Mr Gerson's evidence about what he subjectively thought the faxes meant. The judge referred to section 17 of the 1979 Act. He held that a contract was made on receipt of the reply fax on the 28th February and that the retention of title wording was post-contractual. He then set out the arguments advanced before him by Mr Goodbody on behalf of Gerson, which were substantially to the same effect as those advanced by Sir Roy before us to which I have referred, but held that rule 1 in section 18 of the Sale of Goods Act 1979 applied because no contrary intention appeared.
57. It is apparent that the view formed by the judge did not depend upon the view he formed of the oral evidence. In these circumstances this court is, in my judgment, in as good a position as the judge to determine whether a contract was made, if so on what terms and what the intentions of the parties were as to when property was intended to pass. I have considered each of those questions and, for the reasons which I have tried to give, I have reached a different conclusion from that of the judge. I would hold that no contract was made by the sending and receipt of the reply fax on the 28th February. Alternatively, if, contrary to that view, a contract was made, the parties did not intend the property to pass until payment, which never occurred. It follows (on either view) that Sagebush did not at any stage obtain a good title to the goods as a result of a contract with Gerson and that Mr Wilkinson did not do so either.
58. I said earlier that it seemed to me that if Sagebush had paid for the goods, Sagebush would have become entitled to possession of them. Indeed Mr Gerson accepted in cross-examination that if Mr Smith had paid the money the goods would have been his (or strictly Sagebush's). There are a number of possible routes to that conclusion. The first is that, although there was no contract based on the reply fax on the 28th February, Gerson subsequently made a counter-offer when it sent the invoice together with the detailed schedule of the goods. The counter-offer was on terms that the property would pass on payment, it being implicit that on payment Sagebush would be entitled to delivery of the goods. It is to my mind at least arguable that that counter-offer was accepted when Mr Smith telephoned and asked for Gerson's banking details. However, I do not decide the appeal on that basis because it is not an analysis which was espoused by any of the parties.
59. A second route is also based upon the conclusion that the invoice and fax were a counter-offer. On this view (which on balance is my preferred view), although the counter-offer was not in fact accepted, it would have been by payment. A third route is that to which I have already referred, namely that there was a contract but the parties intended the property to pass on payment, so that property would have passed on payment and Sagebush would have been entitled to delivery. Whatever the correct analysis, for the reasons I have given I would hold that Sagebush did not obtain to the goods by contract.
Section 25(1) of the Sale of Goods Act 1979.
60. Section 25(1) is concerned with the case of a buyer in possession after sale. It provides, so far as relevant, as follows:
"Where a person having bought or agreed to buy goods obtains with the consent of the seller, possession of the goods ... , the delivery ... by that person ... of the goods ... , under any sale ... to another 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 ... were a mercantile agent in possession of the goods ... with the consent of the owner.
61. Mr Wilkinson relies upon section 25(1) to give him title to the goods if the true position is that there was a contract between Gerson and Sagebush but property did not pass to Sagebush under it. It follows that if my conclusion that there was no contract between them is correct, the section will not avail him because Sagebush was not a person who had bought or agreed to buy the goods. However, the section becomes potentially relevant if the true position is that there was a contract between Gerson and Sagebush but property did not pass under it. I shall therefore consider its application on that hypothesis.
62. In order to satisfy section 25(1) Wilkinson has to show that Sagebush obtained possession of the goods with the consent of the seller, namely Gerson. The judge considered Wilkinson's reliance on this section very briefly indeed at the end of his judgment and said that he would if necessary have held that Wilkinson had a good title under section 25(1). Unfortunately the judge does not expressly consider the question whether Sagebush ever obtained possession of the goods with the consent of Gerson. I do not blame the judge in any way for that because, on his view of the facts, the question did not arise, but it does mean that we must consider the question afresh.
63. The sale or sales by Sagebush to Wilkinson took place between the 3rd and 12th March 1997. It follows that in order to succeed under this head Wilkinson must show that Sagebush was in possession of the relevant goods before the relevant sale. His difficulty is that no-one from Sagebush gave evidence. That is, Mr Smith did not give evidence, although the trial was adjourned for a time to enable him to do so. In the event he did not. This makes it very difficult for Wilkinson to establish that Sagebush was ever in possession with Gerson's consent. Although Mr Chaisty said everything that could have been said in support of that conclusion, but, in my judgment, even if Sagebush was in possession of the goods at any relevant time, there is no evidence that it was in possession of them with the consent of Gerson.
64. All the evidence is to the contrary. Mr Gerson was cross-examined at some length on this topic. His evidence was not in any way shaken. Thus he denied that he was aware that after the 28th February Mr Smith or Sagebush had any control over the goods. So far as he was aware, the goods remained in the possession of Emshelf, which had had the possession of them under the lease. He denied that he was content to allow Mr Smith to exert such control over them as he thought fit. There is, in my judgment, no basis upon which that evidence could be rejected. Such other evidence as there is supports Mr Gerson's evidence. For example, the fax of the 18th March quoted above shows, in my judgment, that Mr Gerson regarded the goods as in the possession of Emshelf throughout. He was there telling Mr Greig and Ms Bean that he would collect the equipment, as I read it, from Emshelf, and dispose of it elsewhere. He also asked them whether they knew what Mr Smith's intentions were.
65. It is plain from the retention of title provision on the invoice that Mr Gerson's position throughout was that title would not pass to Sagebush until it had paid. In these circumstances I can see no reason why Mr Gerson might have permitted Sagebush to take possession of the goods and every reason why it should not. Reliance was placed upon the fax of the 26th March to which I referred earlier in which Mr Gerson asked Mr Smith for a complete list showing the present location of the goods. When asked about it, he said that he knew by then that Mr Smith was working in the business, that is the business of Emshelf. As he put it in cross-examination, he did not know that when he prepared the invoice. At that time Mr Smith described himself as being interested in taking over the business and therefore in buying the equipment. He said that he discovered that Mr Smith was working in the business after he sent the fax of the 18th March referred to above, but not before.
66. There is, in my judgment, no evidence that at any relevant time Mr Gerson consented to Sagebush having possession of the goods. His evidence was firmly to the opposite effect and there is no indication that the judge intended to disbelieve anything that Mr Gerson said in evidence. On the contrary, as I indicated earlier, he expressly held that Mr Gerson was an impressive witness. In any event, I can see nothing in the remaining evidence which would justify a conclusion that Gerson consented to Sagebush being in possession of the goods at all, let alone before they were delivered to Wilkinson. It follows that, even if (contrary to my view) there was a contract between Gerson and Sagebush for the sale of the goods, Wilkinson has not established a good title to them under section 25(1) of the Sale of Goods Act 1979.
Conclusion
67. It follows that I would allow Gerson's appeal against Wilkinson in so far as he relies upon a contract between Gerson and Sagebush or upon section 25(1) of the 1979 Act, but, on the basis of the evidence before the judge and before us, I would dismiss the appeal by Gerson against State and hold that State and therefore Wilkinson had good title to the schedule 3 goods. It also follows that I would hold that Wilkinson (albeit wholly innocently) converted the goods other than the schedule 3 goods.
Further Evidence
68. In the course of the argument Gerson sought permission to adduce further evidence in order to enable it to allege or consider alleging that State cannot satisfy that part of section 24 of the 1979 Act which requires that it show that it received the schedule 3 goods in good faith and without notice of the previous sale from Gerson to Emshelf. We indicated that we would give our decision at the same time as giving our judgment on the appeal.
69. Mr Goodbody, who argued this part of the case on behalf of Gerson, correctly accepts that in principle Gerson must satisfy the tests in Ladd v Marshall [1954] 1 WLR 1489, namely that the evidence could not have been obtained with reasonable diligence for use at the trial, that the evidence would, if given, probably have an important influence on the result of the case, although it need not be decisive and that the evidence must be such as is presumably to be believed, or, in other words, it must be apparently credible though it need not be incontrovertible. Mr Goodbody submits, in the alternative, that even if those conditions are not satisfied, the court should admit the evidence on the basis that it is material which has come to light only after the trial.
70. In reality the application is not so much that this court should admit the evidence and decide the appeal on the basis of it, but that because of the new evidence it should give Gerson an opportunity to investigate the matter further and remit the matter to the judge for a consideration of the question whether State had knowledge of Gerson's prior interest in the schedule 3 goods. It may be noted, however, that Gerson has not yet applied for permission to amend the statement of claim to make such an allegation.
71. There are two classes of evidence relied upon which I shall briefly consider in turn. The first can be dealt with shortly. It relates to documents found in a file obtained from a Mr Patrick Ormerod, who trades or traded as UK Finance & Leasing. He apparently acted as a broker in a number of deals either set up or proposed to be set up between State and Emshelf. However, Gerson accepts that Mr Ormerod would not have been acting as the agent of State for any purpose material to this application. Gerson relies upon the fact that the file, which was disclosed to Gerson by State on the 26th May 2000 (and thus long after the trial), suggests that Mr Ormerod was aware of a previous sale and leaseback between Emshelf and Gerson and that he was aware of it before the sale and leaseback agreement between Emshelf and State.
72. State denies that it knew of any previous agreement between Emshelf and Gerson relating to the schedule 3 goods. Mr Antony Roestenburg, who is a solicitor employed by State, says in a statement that he has spoken to Mr Ormerod and indeed to a Mr David Prosser of State, both of whom say that they were aware that a sale and leaseback transaction was done in respect of some equipment, but not aware that it extended to the schedule 3 equipment proposed to State. There is nothing in Mr Ormerod's file to contradict that statement. Indeed there is nothing in the file which supports the conclusion that State were aware that the goods had already been sold to Gerson. Moreover, I accept Mr Lerego's submission that it is most unlikely that it did because, if it had, it would surely not have entered into the sale and leaseback agreement with Emshelf.
73. In all these circumstances, the second Ladd v Marshall condition is not satisfied. It is not shown that the material in the Ormerod file would probably have an important influence on the result of the case. I would not therefore grant the application on this ground.
74. The other class of evidence is somewhat different. The fact that Emshelf had sold the same goods twice to two different finance companies was the subject of a police investigation, although Gerson's solicitors were not aware of that fact until they were told of it in January 2000 by Mr Gerson. It is not clear when Mr Gerson first knew. Nor is it clear what enquiries had been made by Gerson before the trial to check the position with the police. In the early part of this year Mr Jonathan Berkson, of Gerson's solicitors, contacted both DC Nesbitt and State's solicitors. He asked the latter to disclose any documents which State should have disclosed before the trial. They disclosed a document which they said had just come to light, although it later turned out that it had been disclosed before the trial.
75. Mr Berkson obtained a statement from DC Nesbitt, who says that he interviewed Mr Roestenburg on the 29th September 1999 (which was of course long after the trial) and that during the interview he was shown a copy of State's file in connection with its dealings with Emshelf. He says that he saw in the file an internal memorandum on a light green A5 sheet of paper, which, from memory, he thought was dated about March 1995. It was not the document referred to above. DC Nesbitt did not take or retain a copy of the document, but in his statement, which is dated the 22nd February 2000, he said that the gist of the memorandum was to refer to a sale and leaseback already in place in connection with a hive down agreement with regard to items owned by Emshelf. He interpreted it to mean that Mr Prosser was recording that there was a sale and leaseback agreement already in place over the equipment which was subject to the hive down agreement and was seeking a decision whether or not further funds should be made available to Emshelf in respect of the equipment. DC Nesbitt says that he showed the document to Mr Roestenburg, who said that he did not know that it was there.
76. In his statement Mr Roestenburg says that DC Nesbitt's recollection of the document which he describes is entirely consistent with the contents of the document referred to above, which we have seen and which is dated the 29th March 1995. If that is indeed the document which DC Nesbitt had in mind, I agree with Mr Roestenburg that it does not have the meaning ascribed to it by DC Nesbitt. However, DC Nesbitt says that it is not that document. Mr Roestenburg denies that there is any other document.
77. Mr Roestenburg further says (as I said earlier) that it is inconceivable that he or any of the relevant personnel would have agreed to finance a sale and leaseback transaction on goods which were already the subject of a sale and leaseback arrangement with another company. As to the suggestion that he had said that he did not know the memorandum was there, Mr Roestenburg says that he was shown a number of documents by DC Nesbitt as he went through them. He recalls DC Nesbitt showing him the document dated the 29th March 1995 and saying that it showed that State knew about the goods. He says that he may have said that he did not know about that and that he then took the memorandum and said that it did not show that State was aware of the double finance. Mr Roestenburg also explains in his statement how he came to make a change to a draft statement prepared for him by DC Nesbitt.
78. It is not, as I understand it, suggested by Mr Goodbody that if the memorandum was indeed the memorandum dated the 29th March 1995 it supports the case that State knew about the double finance. It could scarcely be so suggested because it was available before the trial and no allegation of knowledge was made. Indeed, although Gerson formally denied absence of knowledge in the pleadings, it at no time asserted relevant knowledge at the trial, which was of course the time to do so. It is not clear what, if any, steps were taken before the trial by Gerson or its advisers to investigate State's knowledge.
79. However that may be, if evidence has come to light which satisfied the second and third criteria in Ladd v Marshall it would or might be appropriate to remit the matter to the judge for trial on the question of knowledge. However, I have reached the conclusion that the evidence of DC Nesbitt is not sufficient to lead to the conclusion that it would probably have an important influence on the result of the case. He did not retain a copy of the memorandum to which he refers, so that his evidence will depend entirely upon his recollection. It was only one of very many documents that he was considering. His evidence has to be set against that of Mr Roestenburg.
80. His evidence strongly suggests that DC Nesbitt is mistaken and that he is remembering the document of the 29th March 1995 and is mistaken as to its meaning. There is no reason on the face if it not to believe the evidence of State's solicitor, Mr Roestenburg, when he says that he did have a conversation with DC Nesbitt in which it was suggested that State knew about the other finance, but that it related to the 29th March memorandum. In all the circumstances, given the unlikelihood of State financing goods which it knew had already been financed under a sale and leaseback arrangement, the chances of a court rejecting Mr Roestenburg's evidence in favour of DC Nesbitts' recollection of a document which is not available are remote indeed.
81. In these circumstance I would hold that the requirements of Ladd v Marshall are not satisfied and, in so far as this is an application to adduce further evidence, I would refuse it. I would only add that I do not think that in all the circumstances it would be appropriate to remit the matter to the judge simply in order to allow Gerson to investigate the matter further, when the results of such an investigation are wholly speculative. The general principle is that there must be an end to litigation. It would not be proportionate, fair or just to allow the matter to proceed further. I would therefore also refuse this application, in so far as it is an application to remit the matter to permit further investigation.
MR JUSTICE BENNETT:
82. I have read in draft the judgement of Clarke LJ. I agree that the appeal of the Claimants should be dismissed in the case of State, but allowed in part in the case of Wilkinson for the reasons which he gives, subject to one point, which relates to the question whether there was a contract made between the Claimants and Sagebush (1997) Ltd in February/March 1997. In my judgement there was, for the reasons that I set out below.
83. On 27 February 1997 the Claimants sent a fax in the terms to be found at page 97 of bundle A offering to make an outright sale of the equipment for £319,000 + VAT. On 28 February Sagebush replied asking for an invoice to be sent in that amount. The equipment was identified by reference to the terminated lease with Emshelf Ltd. The same day the Claimants sent an invoice for that amount plus VAT. Sagebush immediately telephoned the Claimants asking for their bank details which were immediately supplied. In my judgement nothing remained to be done in the creation of a contract.
84. If the course of dealing between the parties as I have set out has to be analysed into offer and acceptance, then in my judgement the Claimants' fax of 27 February was their invitation to treat, Sagebush made their offer on 28 February. The invoice of the Claimants was not an acceptance because of the inclusion of the words " Title in this equipment will pass only upon payment of this invoice". However, the only possible conclusion from Sagebush then asking for the Claimants' bank details is that Sagebush were happy to conclude a contract on that basis. Sagebush thus accepted the Claimants' counter-offer.
85. The judge found that there was a concluded contract when Sagebush sent its reply asking for the invoice and thus " the retention of title wording on the invoice was post- contractual". With respect to the judge I cannot accept that. It seems to me highly unlikely that either Mr. Gerson, on behalf of the Claimants, or Mr. Smith, on behalf of Sagebush, would have made a deal, as found by the judge, in which the title in the goods passed before payment. Mr Smith did not give evidence. If he had, he could not have truthfully denied that title was not to pass until Sagebush had paid for the equipment. In my judgement such is demonstrated by the lengths he went to delete the retention of title words from Sagebush's copy of the invoice (see page 29 of the judge's judgement). Further the fact that the invoice contained a retention of title clause would suggest that Mr. Gerson, a highly experienced businessman, would not have entered into a contract under which his company would have been so obviously at risk i.e. title passing before payment.
86. If I am wrong and a contract was entered into solely by reason of the fax of 27 February and Sagebush's reply of 28 February asking for an invoice, then I agree that the parties intended the title only to pass on payment. Payment was never made and so title never passed.
87. I also agree that Gerson's application to adduce further evidence and to remit the matter to the trial judge should be refused for the reasons given by Clarke LJ.
LORD JUSTICE PILL:
88. I agree in the result and address only two points, the effect of section 24 of the Sale of Goods Act 1979 upon a commercial sale and leaseback and the alleged contract of February 1997 between Michael Gerson and Sagebush.
89. On the first point, I agree that the question is whether there was a constructive delivery of the Schedule 3 goods by Emshelf to State, upon the sale to State and leaseback to Emshelf. Constructive delivery is an artificial concept which may apply in a number of situations. The law permits a change of possession without any change of the actual custody upon the principle known as constructive delivery (An Essay on Possession in the Common Law; Pollock and Wright 1888). In this case actual custody has remained with Emshelf.
90. Mr Lerego submits that the focus must be upon the sale to State, and not upon what happened afterwards, when considering whether a constructive delivery occurred upon that sale, The precise nature of the lessee's subsequent position is irrelevant. The character of his possession has changed because, on a sale and leaseback, the lessee now holds upon a lease. Because there has been a change in the character of possession by Emshelf, there had been a constructive delivery to State.
91. I see the force of Sir Roy Goode's attempts to make the concept of constructive delivery less artificial by supplying a rationale based on the further concept that a delivery can be taken to have occurred only when there has been an assumption of control by the constructive possessor. That would include an acknowledgement by the person with custody of the goods that he holds at the direction or disposal of the person to whom delivery is said to have occurred. The submission was refined to one that, for section 24 purposes, there must at least have been a moment of time when the purported constructive possessor could say that the goods were being held for him. A sale and leaseback in the present form did not satisfy that requirement. Emshelf were holding for their own purposes under a lease.
92. I agree with Clarke LJ that the authorities do not establish that proposition. I agree with Clarke LJ's conclusion, at paragraph 30 of his judgment, that the change in the character of possession upon the sale and leaseback in this case is sufficient to establish that a constructive delivery has been made. I express no view as to whether it makes commercial sense to allow innocent finance companies to take advantage of section 24 of the 1979 Act when they conduct a sale and leaseback. However, I do see force in the submission that application of the principle advocated by Sir Roy Goode would produce further artificiality and fine distinctions in sales and leasebacks. What would in substance be no different an arrangement could be dressed up so as to achieve the sought after moment in time.
93. As to the existence of a contract between Michael Gerson and Sagebush, I
agree with the conclusion of Bennett J, whose judgment I have had the
opportunity of reading in draft, that there was. However, I also agree with
him, and with Clarke LJ, that on the evidence the circumstances were such that
the parties did not intend that property would be transferred when the contract
was made and property was not transferred. Even if the contract was made upon
the exchange of faxes, and that was Mr Chaisty's primary submission, I would
reach the same conclusion that the parties did not intend the property to be
transferred when the contract was made.
94. I agree with the order proposed by Clarke LJ.
Order: The appellant to pay the costs of the second defendant, including
the application to amend and adduce further evidence. Costs to be subject to
detailed assessment on the standard basis. It was agreed that judgment be made
for the claimant as regards against the first defendant, Mr. Wilkinson, in
relation to the Schedule 2 goods, and damages for conversion, to be assessed.
The above to be set out in a minute order for the purposes of determination of
costs. Written submissions to be made and ruling to be given in
writing.
(Order does not form part of approved judgment.)