Scottish Court of Session Decisions

LORD ROSS'S OPINION.—The pursuers supplied to the order of the first defenders the goods set out in Appendix A. The said goods are said to have a value of nearly £16,000.

The second and third defenders were appointed as receivers of the first defenders on 29th October 1981. In this action the pursuers are seeking (1) delivery of the goods set out in Appendix A, (2) failing delivery, payment of the value of the goods, and (3) interdict of the defenders from selling or disposing of, or in any way interfering with, any of the goods other than by delivering them to the pursuers. The pursuers now seek interim interdict and I heard a motion for interim interdict on 2nd December 1981 when the defenders were represented by counsel on caveats.

The pursuers aver that the various contracts for the supply of goods were subject to the pursuers' general conditions of sale and they founded particularly on Conditions 8.1 and 8.2 of these general conditions. The terms of these particular conditions are set out in Article 3 of the Condescendence. The two conditions purport to reserve to or retain for the pursuers the title to goods sold to the customer until payment to the pursuers by the customer of the full purchase price, all additional charges and any other monies for the time being owed by the customer to the pursuers. They provide that pending such payment the goods held by the customer and all products into which such items come to be converted or incorporated shall remain the property of the pursuers and shall be held by the customer as trustee for the pursuers with liberty for the customer to pass title as the pursuers' agent on a sale or on a disposal of the goods by the customer on its own account.

A number of issues were canvassed before me. (1) An invoice was produced on the reverse of which general conditions of sale were set out. There is no reference to these general conditions of sale on the face of the invoice but the pursuers produced a letter dated 23rd June 1981 addressed to the first defenders under their earlier name of South Side Sawmills Limited in the penultimate paragraph of which a reference is made to the prices quoted in the letter being "subject to the companies' terms and conditions (copies available on request)." Mr Drummond Young for the defenders maintained that including general conditions of sale on the reverse side of an invoice was ineffectual to incorporate these general conditions into a contract of sale which must have preceded the invoice, but Mr M'Eachran maintained that there had been a course of dealing here and that the letter showed that the first defenders had had notice of the general conditions. The pursuers have averred in Article 3 of the Condescendence that the various contracts were subject to the pursuers' general conditions of sale. At this stage I feel that it is reasonable to proceed on the basis that the pursuers will be able to prove that averment, and I shall therefore proceed upon that basis although I appreciate that at the end of the day it may turn out that the general conditions of sale have not in fact been incorporated into all the contracts for the supply of goods. (2) The summons proceeds upon the hypothesis that all the goods set out in Appendix A are still in the possession of the first defenders. I was informed, however, that goods to the value of nearly £10,000 had already been sold by the defenders and that the value of those still in their possession amounted to some £6,295. It was agreed that any interim interdict which I might pronounce could apply only to those latter goods. (3) Mr Drummond Young's main submission was that Condition 8.1 was ineffectual in law. It was an attempt to create a hypothec. Also the latter part of Condition 8.1 which related to an alleged trust was clearly ineffectual and was invalid in the light of the recent decision in Clark Taylor & Co. Ltd. and Quality Site Development (Edinburgh) Ltd. 1981 SC 111.

I accept that the only recognised forms of legal hypothec (that is where a person has security without possession) are those of a landlord, a superior, a solicitor and certain maritime hypothecs. In my opinion Mr Drummond Young is well-founded in his contention that Condition 8.1 must be construed as an attempt to create a hypothec of a type not recognised by law. It is contrary to principle that a seller in Scotland should be able to obtain security in this way.

Mr M'Eachran for the pursuers pointed out that in terms of the general conditions of sale all the pursuers' contracts are to be governed by the law of England and he submitted that in England a clause whereby the vendor retains the property in the goods does receive effect at least so long as the goods remain in the possession of the purchaser (Aluminium Industrie Vaasen B.V. v. Romalpa Aluminium Ltd. [1976] 1 W.L.R. 676). Later English cases have dealt with the situation where the goods purchased had been resold or processed (In re Bond Worth Ltd. [1980] Ch. 228, Borden (U.K.) Ltd. v. Scottish Timber Products Ltd. [1981] Ch. 25).

The pursuers, however, have not made any averments as to the law of England and, in the absence of any such averments, I am bound to assume that there is no difference between the law of England and the law of Scotland (Anton, Private International Law, p. 565, Rodden v. Whatlings Ltd. 1961 SC 132). As Lord Walker said in Rodden at page 133, "Where however a pursuer is not expressly founding on some specialty of foreign law, the presumption for him, and against him, is that the law applicable to the case does not differ from Scots law." It follows that I must decide this case on the basis of Scots law. Having considered the terms of Condition 8.1, I am of opinion that it cannot be construed merely as a clause of retention of title but that it is truly an attempt to create a security without possession in which the machinery of a trust under Scots law is sought to be employed. It is significant that security is sought not only for the purchase price of the goods but also "for all and any other monies for the time being owed by the customer to the company." So far as the reference to trust is concerned I am quite satisfied that no valid trust under the law of Scotland could be created by the language used in this condition (Clark Taylor & Co. Ltd., supra).

It follows that Condition 8.1 in my opinion is wholly ineffectual. Mr M'Eachran submitted that, even if the decision in Clark Taylorapplied, there was no reason why the earlier part of the condition reserving title should not be treated as having effect. In my opinion, however, Condition 8.1 cannot be broken down in this way and it is in reality an attempt to obtain security without possession using the machinery of a trust. The attempt is not well-founded in law and in my opinion is ineffectual.

The pursuers' claim for interdict is based solely on Condition 8.1 and 8.2 and it follows that the pursuers have failed to put forward a prima facie case for interdict.

I would only add that, even if Condition 8.1 had appeared to be soundly based in law, I would have found it difficult to grant interiminterdict since under the condition the pursuers purport to confer on the first defenders a liberty to pass title as the company's agent on a sale. I am not satisfied that the pursuers would be entitled to change their minds and to recall at will the power of sale which they had purported to confer upon the first defenders by this condition; yet, unless that power of sale could be recalled, the defenders could hardly be interdicted from selling or disposing of the goods.

In all the circumstances I shall refuse the pursuers' motion for interim interdict.