Supreme Court New South Wales Medium Neutral Citation: In the matter of Sultan Trad Pty Limited (in liquidation) ACN 132 643 228 [2016] NSWSC 1633 Hearing dates: Monday, 7 November 2016 Date of orders: 08 November 2016 Decision date: 08 November 2016 Jurisdiction: Equity - Corporations List Before: Brereton J Decision: Proceedings adjourned to 28 November 2016 in the Corporations Judge's directions list. Catchwords: CORPORATIONS – winding up – liquidators – judicial advice – whether liquidator justified in making payments to obtain delivery of bottles of wine or causing company to enter into agreement to obtain delivery of wine – whether liquidator justified in dealing with wine or moneys received as assets of company for purposes of winding up – unascertained and future goods – whether appropriated to contract and property passed – whether assent to appropriation occurred – held, further submissions required – held, not appropriate to give advice at this stage Legislation Cited: (CTH) Corporations Act 2001, s 511 (NSW) Sale of Goods Act 1923, s 5 Cases Cited: B & H Constructions Pty Ltd v Campbell [1963] NSWR 333 Dutton v World Trade Promotions [1984] 3 NSWLR 130 Stein, Forbes & Co v County Tailoring Co (1917) 86 LJKB 448 Wardar's (Import & Export) Co Ltd v W Norwood & Sons Ltd [1968] 2 QB 663 Texts Cited: KCT Sutton, Sales and Consumer Law (1967) 4th e Category: Procedural and other rulings Parties: Bradd William Morelli in his capacity as liquidator of Sultan Trad Pty Limited (in liq) (first plaintiff) Sultan Trad Pty Limited (in liquidation) ACN 132 643 228 (second plaintiff) Representation: Counsel: H K Insall SC (plaintiff) Solicitors: Hugh & Associates (plaintiff) File Number(s): 2016/ 320832 Judgment (ex tempore) 1. HIS HONOUR: By an originating process filed on 27 October 2016, the first plaintiff Bradd William Morelli, who is the liquidator of the second plaintiff company Sultan Trad Pty Limited, seeks advice and directions pursuant to (CTH) Corporations Act 2001, s 511, to the effect that (1) he would be justified in making payments to Inland Trading Company Australia Pty Limited in order to obtain delivery of some or all of 24,870 bottles of wine currently in the possession of Inland, or causing the company to enter into an agreement with Inland whereby it obtains delivery of some or all of that wine, or Inland retains some or all of it in exchange for the repayment of money; and (2) in dealing with any of the wine received from Inland, or any moneys received from Inland pursuant to any such agreement, as assets of the company to be realised and/or applied for the purposes of the winding up and for the benefit of the company's creditors generally. For the reasons I will now deliver, I am not at this stage prepared to give that advice. That is not to say that, with the benefit of further submissions, I would remain unprepared to do so; or that I might not be prepared to give some alternative form of advice. The purpose of the reasons I am about to deliver, then, is to indicate the respects in which I presently entertain some doubt, and which would be clarified by further submissions and/or evidence. 2. As I have said, the first plaintiff Bradd William Morelli is the liquidator of the second plaintiff Sultan Trad Pty Limited in a creditors' voluntary winding up, pursuant to a resolution of the company made on 18 February 2016. The company was in the business of wine brokerage. On 3 February 2016, Canterbury Wines placed an order with the company for 24,000 bottles of 2014 Penfolds Rawson's Retreat, 768 bottles of Penfolds 2012 Bin 389 and 90 bottles of Penfolds 2012 Bin 707. The company invoiced Canterbury for $189,522 inclusive of GST, and Canterbury paid that invoice on 11 February 2016. The invoice contained the following relevant term: Please pay on Friday 12th of February. Will dispatch the wine to you on Wednesday 17th of February. 1. Some time after 3 February and before 14 February 2016, the company ordered from Inland 24,000 bottles of Rawson's Retreat, 780 bottles of Bin 389 and 90 bottles of Bin 707. On 14 February, one Henry Yang, who appears to be the principal of the customer on whose behalf Canterbury placed its order with the company, contacted Inland and sought to obtain wine directly from Inland. On the same day, Inland wrote to the company in respect of proposed delivery arrangements. On 15 February, Inland invoiced the company for $180,555.10, including GST, but subsequently, Inland issued a revised invoice for $164,141 exclusive of GST. On 16 February, Inland offered to arrange delivery of the subject wine to the wharf for collection, it would seem, by Mr Yang. 2. On 16 February at 2.06pm, the company sent an email to Canterbury: Anyways, this does not matter. ITC is willing to organise the pack and delivery of these wines to the wharf for you in Sydney at cost. To package container and deliver to the wharf the costs will be as follows 1. The costs were then itemised, and the email continued: So the total per container would be AUD995.00. Please advise how you would like to proceed. 1. On 17 February at 12.13pm, Inland sent an email to Mr Yang, which was copied also to the company, as follows: Henry, at the moment ITC has in its warehouse the Rawson's Retreat Shiraz Cabernet you purchased from Canterbury Wines. ITC has offered to pack this wine and deliver to the wharf for AUD1000 per container. Can you please advise how you would like to proceed. We also have some 389 and 707 as part of the same purchase from Canterbury Wines. Looking forward to how you want to progress on this. Thanks. 1. There does not appear to have been a reply to either of those emails before 18 February, when the company went into liquidation. However, on 16 February, the company paid Inland the GST-exclusive invoiced sum of $164,141. Canterbury contends that the wine is held on trust for it or that property in the wine has passed to it. Inland apparently maintains that GST is still payable to it, and that it is also entitled to storage fees. 2. Whether GST is properly payable has not been developed, and this may not be insignificant; in particular it may be important whether or not it can be said that the wine has been fully paid for. If Inland was prepared to issue a GST-exclusive invoice (on the basis that the goods were to be exported) and has been paid, it is not immediately apparent why it can insist on GST in addition. 3. It is in that context that the originating process was filed on 27 October seeking the advice to which I have referred. As it seems to me, the position can be summarised as follows. First, there was a contract between Canterbury and the company for the purchase of the wine. There is nothing to indicate on the face of the documentation that either Canterbury or the company was acting other than as principal. At the time of the contract, the goods were, for the purposes of the (NSW) Sale of Goods Act 1923, unascertained goods (because they were generic goods or goods of a class) and they were future goods (because they were goods to be acquired by the seller after the making of the contract of sale): see s 5. Under Sale of Goods Act, s 23, rule 5, the presumptive position, unless a different intention appears, in the case of a contract for the sale of unascertained or future goods by description (as this was) is that where 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. 4. There was then a contract made between the company and Inland. Again, so far as the documentary material indicates, each party dealt with the other as a principal. Again, the contract between the company and Inland was, at that stage at least, for unascertained if not future goods, and again rule 5 applies. At some point prior to 18 February, however, it would seem that Inland appropriated particular wine to the contract. The inference that it did so appears from the email of 17 February 2016 to which I have referred, and the company's acceptance or consent to that appropriation, if not implicit in the original contract – which it may well be – is also evidenced by the company's email of 16 February 2016. Thus, it seems to me at least arguable that property in the wine passed to the company when it was appropriated by Inland prior to 18 February. 5. Likewise, the two emails to which I have referred suggest that the particular wine was appropriated by the company to its contract with Canterbury. The terms of Inland's email of 17 February copied to the company, which refers to the wine purchased from Canterbury Wines with specificity, suggests that to have been so. It therefore seems to me at least arguable that the wine in question was appropriated to the contract with Canterbury and that property in the wine passed to Canterbury. 6. But there are some reservations. I have referred to the circumstance that consent to an appropriation may be given in advance and indeed may be implicit in the contract. In B & H Constructions Pty Ltd v Campbell [1963] NSWR 333 at 336, it was held that on the making of a contract for the sale of steel work to be fabricated by the seller, the buyer assented implicitly to a subsequent appropriation by the seller so that the property passed when the seller, having completed the steel work, appropriated it to the contract. It might be said by analogy that here where Canterbury Wines ordered wine of a specific description from the company, it implicitly assented to a subsequent appropriation by the company once the company went out and purchased the wine to fulfil the order. 7. Next, there are cases in which the acknowledgment by a third party that it holds goods in its possession for the purpose of satisfying the contract between the seller and the buyer amounts to an appropriation; in particular, the setting aside by a third party in possession of the goods of part of the bulk, and the acknowledgment that that part belonged to the buyer, can amount to a sufficient appropriation [see Wardar's (Import & Export) Co Ltd v W Norwood & Sons Ltd [1968] 2 QB 663]. A number of other cases are helpfully noted in KCT Sutton's "Sales and Consumer Law" 4th ed [at paras 14.22-14.24]. Perhaps of some interest in the present context is Dutton v World Trade Promotions [1984] 3 NSWLR 130 at 133, in which the nomination of certain wine, which the buyer wished to taste and paid to do so, was a sufficient appropriation. 8. The reason why it seems to me that the issues about the GST and storage fees may be important is that, if property is to pass, the appropriation must be unconditional. Sutton says that an appropriation is not unconditional if the seller only means to let the buyer have the goods on payment [see at para 14.26]. But the authority cited for that is Stein, Forbes & Co v County Tailoring Co (1917) 86 LJKB 448, in which Atkin J said only: I doubt whether goods are appropriated unconditionally if the seller does not mean the buyer to have them unless he pays for them. 1. That is a less emphatic proposition than as stated by Sutton. In any event, it seems to me that if the purchase price has been paid, there is a not straightforward question as to whether property has passed if the only outstanding amount is uninvoiced GST (if any), and potentially storage fees not referred to on the face of the contract. 2. For those reasons, it seems to me that it may well be that property in the wine has passed to the company and then to Canterbury; but it is not yet clear to me that that is so, and further submissions or evidence could show that it has not. For those reasons, at this stage, I do not consider it appropriate to give the advice sought. 3. Accordingly, the Court orders that: 1. The proceedings be adjourned to Monday, 28 November at 10am in the Corporations Judge's directions list. ********** DISCLAIMER - Every effort has been made to comply with suppression orders or statutory provisions prohibiting publication that may apply to this judgment or decision. The onus remains on any person using material in the judgment or decision to ensure that the intended use of that material does not breach any such order or provision. Further enquiries may be directed to the Registry of the Court or Tribunal in which it was generated. Decision last updated: 18 November 2016