W J SHIPTON CONSTRUCTIONS PTY LIMITED v GAINFORT'S PLUMING & ELECTRICAL WHOLESALERS PTY LIMITED SUPREME COURT OF NEW SOUTH WALES — COURT OF APPEAL KirBY P, CLARKE JA and POWELL JA 7 November, 20 December 1995 [1995] NSWCA 489 SALE OF GOODS — passing of property — presumed intention of parties — goods to be held in store and paid for — when unpaid, goods reclaimed — whether property had passed before seizure — held: It had. WORDS & PHRASES — "property... passed". Clarke JA'"'Re: MSB Bond Store 1. As per our recent telephone conversation I am pleased to quote on the light fittings for the abovementioned site and my quote is attached. As agreed between us the Bond Store (MSB Bond Store 1, Hickson Road, Sydney) will be used as a storage site by this company and when all the quoted light fittings are on site payment will be made within 7 days by Ewings Finance. We hope this quote is successful and we look forward to hearing from you.' It is common ground that the quotation attached to the letter of 11 January 1985 for the supply of light fittings at a total cost of $61,614.06 was accepted. In March 1985 Danubex called for the goods and they were delivered in instalments and held in an area on the construction site assigned to Danubex and which that company kept caged and locked. On each occasion that deliveries were made invoices were submitted. According to the trial judge's findings all the light fittings were delivered by the end of March or early April but no payment was received for those fittings. Demands for payment were made but, because Danubex was in financial difficulties, no payments were forthcoming. Her Honour accepted the evidence of Mr Gainfort that following delivery of all the light fittings he had a number of conversations with Mr Harrison of Danubex culminating in a telephone conversation on 7 or 8 May 1985 in which he informed Mr Harrison that unless payment was forthcoming he would make arrangements to collect the fittings from the site. This threat did not bring about any payment and on Monday, 13 May 1985, a building worker's rostered day off, Mr Gainfort went to the deserted site, broke the chain securing the goods in the designated area to which I referred and removed all the goods which the respondent had delivered and which were in that area. The respondent then issued credit invoices totalling $44,543.69 in respect of the goods which it took. It seems to have been accepted that thebalance of the goods which had been supplied by the respondent had been installed on the premises which were under construction. For its part the appellant, through Mr Fawcett (its general manager in 1985), gave evidence that it had paid Danubex for all the light fittings which had been delivered. Her Honour accepted the evidence of Mr Fawcet that the progress payments to Danubex during April and early May 1985 included an amount for light fittings in the sum of $61,614 (which it will be remembered was the value of the light fittings delivered by the respondent to Danubex). 2 UNREPORTED JUDGMENTS Following the events of 13 May 1985 the appellant sued the respondent alleging that it had converted the electrical goods. The respondent pleaded its statement of defence in very wide terms but it would appear that, in essence, the respondent denied that property in the light fittings had passed to the appellant and asserted, alternatively, that it re-took possession of the goods pursuant to agreement between Mr Gainfort and Mr Harrison of Danubex who, it was said, had ostensible or actual authority to bind the appellant to such an agreement. The proceedings were heard by Karpin DCJ who, on 22 July 1993, found a verdict for the respondant. Her Honour gave two reasons for that conclusion. The first was that title was not intended to pass under the contract between the respondant and Danubex until the latter paid for the fittings. The second was that in any event there was a subsequent agreement between the respondant and Danubex entitling the respondant to retake possession of the goods. The appellant appealed from that decision and on the hearing of the appeal the argument focused essentially on the question whether property had passed in the fittings from the respondant to Danubex prior to the respondent seizing them. The appellant's submission was that property in the light fittings passed to Danubex when all the light fittings which the respondent was required to deliver under the contract had been delivered to the Bond Store. It put its argument in two ways. First, it submitted that the respondent's clear intention, to be derived from its letter of 11 January, was that the light fittings would remain the property of the respondent until all the light fittings had been delivered. Until that time Danubex was to hold them as bailee on behalf of the respondent. Once, however, all the fittings had been delivered, payment was to be made within 7 days. It was at the time that Danubex became liable to pay for the light fittings (ie when delivery was complete) that property passed. This, it was submitted, was clear from the terms of the letter of 11 January. Secondly, the appellant contended that if the court did not accept is first argument Rule 5 of s 23 of the Sale of Goods Act 1923 applied. That rule provides: (1) Where there is a contract for the sale of unascertained or future goods by description, and goods of that description and in a deliverable state are unconditionally appropriated to the contract either by the seller with the assent of the buyer or by the buyer with the assent of the seller, the property in the goods thereupon passes to the buyer. Such assent may be express or implied, and may be given either before or after the appropriation is made. (2) Where in pursuance of the contract the seller delivers the goods to the buyer or to a carrier or other bailee (whether named by the buyer or not) for the purpose of transmission to the buyer and does not reserve the right of disposal, he is deemed to have unconditionally appropriated the goods to the contract. The appellant submitted that once delivery of the light fittings was made they became ascertained and once delivery was complete they were unconditionally appropriated to the contract by the respondent, as seller, with the consent of Danubex. It was said that the terms of the letter of 11 January supported the view that the fittings were appropriated to the contract when delivery was completed and that Danubex's assent could be inferred from its use of some of the fittings in the construction work and its acceptance of the terms of the 11 January letter and the quotation. WRJJ SHIPTON CONSTRUCTIONS PTY LIMITED v GAINFORT'S PLUMING & ELECTRICAL WHOLESALERS PTY LIMITED (Clarke JA""Re: MSB Bond Store 1) The relevant principles to be applied appear in the Act in clear terms -(a) In respect of the sale of unascertained goods property does not pass until the goods are ascertained (s 21); (b) Once the goods are ascertained property passes at such time as the parties intend it to pass; in determining intention regard should be had to the contract, the conduct of the parties and the circumstances of the case (s 22); (c) Unless a different intention appears Rule 5 will apply. There can be no question but that goods of the express description were delivered to the secure area designated for the goods of the appellant and the argument which was accepted in the court below and which was pressed again in this court was that there was a reservation of title until payment was made to be found in the letter of 11 January 1985. I would agree with her Honour that the critical question in the case is the presumed intention of the parties as derived from the letter. (I have used the expression "presumed intention" in the sense in which that phrase was used by Mason J in Codelfa Constructions Pty Ltd v State Rail Authority of NSW (1982) 149 CLR 337, at 352.) That letter, and the known facts regarding delivery provide, in a real sense, the only relevant evidence on the issue. That is because no oral evidence was led as to the content of the discussions preceding the sending of the 11 January letter which may have made its meaning clearer. The relevant portion of the letter neither mentions title nor ownership nor uses any other words which refer to those concepts. In particular there is no specific reservation of the right of disposal. The meaning of the words actually used in the letter is not entirely clear. Two things can, I think, be said of the relevant portion of the letter. In the first place it was proposed that the respondent would deliver the goods to the Bond Store on terms that these goods would be held there in storage for the respondent. The statement that 'the Bond Store will be used as astorage site by this company' is consistent only with that interpretation. On the other hand, while the goods were held in the designated area in storage for the respondent there was no liability upon Danubex to pay for them. The second statement made by the letter was that once all light fittings had been delivered to the site seven days would be allowed for payment by Ewings Finance (the financier from whom Danubex was hoping to secure finance). It would seem to me that the intention of the parties to be drawn from this statement was that the property in the goods would pass to Danubex only when all deliveries had been made and liability to pay arose. Her Honour thought that the clear import of the letter was that property in the goods would not pass until payment had been made. The letter does not say that and while the view taken by her Honour reflects a construction which may have been open I think the better view is that the property in the goods passed immediately all had been delivered and time ran for payment. There is no doubt that the respondent had delivered all goods more than seven days prior to the date on which it retook possession and accordingly I am of opinion that the property had passed prior to its carrying out that act. Further, and there was little discussion of this during the hearing of the appeal, her Honour's finding that the appellant had paid for the goods before 13 May strongly suggests that property in the goods had passed from Danubex to the appellant before possession of them was retaken by the respondant. This may be an unnecessary conclusion for, although there was a half-hearted attempt before 4 UNREPORTED JUDGMENTS the trial judge to run a jus tertii defence, that was not pressed before this Court. It seems to have been accepted that the fundamental issue to be determined on the appeal was whether property in the light fittings had passed from the respondent to Danubex. Because I am of the view that it had passed well prior to 13 May the appeal should be upheld. If I be wrong in this conclusion it would seem to me that the same result would follow the application of Rule 5. Once all the light fittings had been delivered there was an unconditional appropriation of them to the contract by the respondent, and by using them, Danubex, in my opinion, assented to the appropriation. On either view the appellant succeeds. In the circumstances it is unnecessary to deal with an alternative case under s 28 of the Act which was pressed by the appellant. I should, however, indicate that I am not convinced that it should succeed under that provision as it was aware, at the time it paid for the goods, that Danubex was in financial trouble. However, as there was no detailed argument on the point I refrain from concluding an opinion upon it. The respondent did not seek to support her Honour's conclusion that the respondent took possession of the goods with the concurrence and agreement of Danubex. There are many problems with this view and that possibly explains the fact that no argument was advanced to support it. In the first place the respondent simply told Danubex it was going to retake possession of the goods and the latter's lack of opposition could not constitute an assent necessary for the formation of a contract. In the second place there was no consideration for any such contract. In the third place the evidence, prima facie, supports the conclusion that the property in the goods had already passed to the appellant before 13 May and Danubex had no right to enter into an agreement for the respondent to re-take possession of them. And, in the fourth place, to the extent that the respondent asserted that Danubex acted as an agent for the appellant there was simply no evidence to support that case. In my opinion her Honour erred in entering a verdict for the respondent and the following orders should be made: (1) Appeal allowed;(2) Verdict and judgment of Karpin DCJ of 22 July 1993 be set aside; (3) Direct entry of verdict and judgment in favour of the appellant in the sum of $44,543.69 together with interest pursuant to s 83A of the District Court Act from 13 May 1985 to the date of this judgment; (4) The respondent to pay the appellant's costs of the trial and the appeal and to have a certificate under the Suitors Fund Act in respect of the costs of the appeal. Powell JA. I agree with Clarke JA. Orders accordingly. Counsel for the appellant: VR Gray Solicitors for the appellant: Malcolm Johns and Company Counsel for the respondent: D W Elliott Solicitors for the respondent: Philip Parbury and Associates