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The Sale of Goods, 3rd Edition by Bridge, M G (1st January 2014)

3 The Passing of Property

From: The Sale of Goods (3rd Edition)

M G Bridge

Subject(s):
Passing of property — Bills of lading

(p. 79) The Passing of Property

Introduction

General.

3.01  Sale of goods law deals with a hybrid transaction that consists of contract and conveyance. In contrast with the sale of land, sale of goods is informal and fast-moving. Consequently, the sequence of contract and conveyance is not as clearly differentiated as it is in the case of sale of land. The passing of property in goods affects contractual rights and duties. It is the fulcrum on which depend issues as diverse as the seller’s entitlement to sue for the price1 and the incidence of risk of loss or casualty to the goods.2 The passing of property may also have an incidental effect on the remedies of the parties, including specific performance. Until the law was changed in 1967,3 the buyer’s right of rejection was affected by whether the property in specific goods had passed at the time of the contract. The passing of property is also of prime significance in defining the position of buyer and seller on the other’s insolvency. The whereabouts of the property may affect third parties as it touches upon liability in conversion,4 insurable interest, liability to tax, criminal responsibility,5 and the amenability of the goods to execution and insolvency creditors.6 Lord Blackburn was largely responsible for the central position occupied by the passing of property in sales law.7 A century later, Karl Llewellyn, a proponent of legal realism and the principal architect of (p. 80) the American Uniform Commercial Code, trenchantly criticized the ‘lump’ concept of title (or property), namely the use of property to resolve divergent issues by mechanical means without heeding the different functional requirements of these issues.8 There are signs of the ‘narrow issue thinking’ he favoured in cases on risk, where practicalities are allowed to override legal doctrine. But, to take other examples, functional thinking does not seem much in evidence in actions for the price and the rights of pre-paying buyers when the seller becomes insolvent.

The Rule Structure

General.

3.02  The passing of property was first permitted by manual delivery and then by a deed of transfer. It was only some considerable time later that it could be accomplished purely in accordance with the intention of the contracting parties.9 Even though, in principle, the passing of property was thus emancipated from physical delivery, in practice the two events largely coincide. Subject to that, the passing of property in accordance with the intention of the parties is today the dominant rule. The paramountcy of intention is established in section 17 but the parties’ intention is checked in the case of unascertained and future goods, where the property may only pass once the goods become respectively ascertained or existing.10 A purported present sale will not automatically become a sale once the goods become existing goods;11 the parties must also agree their unconditional appropriation to the contract. The same result should hold true for a purported sale of unascertained goods, though section 16 does not explicitly say so. These rules have been supplemented by provisions introduced by the Sale of Goods (Amendment) Act 1995, notably section 20A. It is now possible for an undivided share to pass to the buyer by way of tenancy in common where the buyer has paid and the goods are to come from a bulk that has been identified to the contract at or subsequent to the contract date.12 The Act is unclear on the process by which the buyer’s interest in the bulk is transformed into the general property in ascertained and unconditionally appropriated goods. This is discussed later.13

Intention.

3.03  Except where the seller gives up possession but retains the property in the goods as security for the payment of the price, it is relatively uncommon for buyer and seller to express their intention concerning the passing of property. The Act encourages an inquiry (p. 81) into ‘the terms of the contract, the conduct of the parties and the circumstances of the case’14 but sets out in section 18 presumptive rules of intention if such inquiry is fruitless.15 By these rules,16 the property in specific goods passes at the contract date, unless the goods have to be put in a deliverable state, or the seller has to weigh, measure, or test them to determine the price. In sale or return and similar transactions, the property passes as soon as the contract of sale is concluded because the goods are necessarily specific at that time. Unascertained and future goods are dealt with together in the one rule, which requires their ‘unconditional appropriation’ to the contract by one party with the ‘assent’ of the other; a particular application of the rule is then given for the case where a carrier is employed to deliver the goods.

Reserving the right of disposal.

3.04  Tacked on to this scheme of rules, but in a way that is not clearly linked to the previous set of rules on the passing of property, is section 19. This provision deals with cases where the seller ‘reserve[s]‌ the right of disposal’ of goods,17 whether specific or later ‘appropriated’ to the contract, that are delivered to the buyer or to a carrier or other bailee. Before the Act, it was not clear whether such action by the seller reserved in him the property in the goods or asserted the continuance of a lien over them, at least in those cases where the seller retained control of shipping documents.18 This lack of clarity is evident in the failure of section 19 to state bluntly that the seller retains the property and to integrate section 19 into the scheme of the preceding sections.

Related contracts.

3.05  As for contracts involving the transfer of goods that are not contracts of sale, such as barter contracts and work and materials contracts, there is a distinct shortage of authority on the passing of property from transferor to transferee. It is likely that the rules of the Sale of Goods Act would be applied,19 a court being perhaps not too astute to say that this is done as a matter of analogy.

Specific Goods

Section 18, Rules 1–3

Section 18, Rule 1

General rule.

3.06  Section 18, Rule 1, provides: ‘Where there is an unconditional contract for the sale of specific goods in a deliverable state20 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.’21 The closing words appear to limit severely the chance of (p. 82) finding a contrary implied intention.22 Yet, in modern times, the courts have been prepared to find a way round this presumptive rule,23 which is founded on the fiction that a delivery of the goods to the buyer is deemed to have occurred upon the conclusion of the contract.24 There is some small justification for the rule if the parties are inter praesentes and all that is left to do is for the buyer to carry away the goods.25 The presumptive rule is that delivery occurs at the seller’s place of business,26 where the specific goods will usually be found, and the seller may exercise a lien to prevent the buyer from taking away the goods before payment if credit is not allowed under the contract.27 Here, a fusion of the contract and the conveyance may well accord with the expectations of the parties. But the goods may be elsewhere and delivery may be delayed, and these variations cause the fiction to break down. Until quite recent times, section 18, Rule 1, was applied almost as an ineluctable rule of law, consistently with the declared immateriality of postponing delivery or payment. It has also been applied though the seller had further duties to perform, such as cutting standing hay28 and delivering the goods to a carrier.29 The property has been held to pass with the fall of the auctioneer’s hammer, despite the unknown reputation of the successful bidder.30 It has also passed despite the goods being in the hands of a bailee who has not yet attorned to the buyer.31

Inconsistent intention.

3.07  The existence of an inconsistent intention ousting section 18, Rule 1, was considered at length in Re Anchor Line (Henderson Brothers) Ltd32 where the buyers of an electric crane on instalment terms were to have ‘the entire charge and responsibility for the crane’. They were to pay a ‘deferred purchase price’; references were made to the ‘completion of the purchase’; and the instalments covered ‘interest’ and ‘depreciation’. On the liquidation of the buyers, the court held the property remained with the sellers. More recently, an inconsistent intention has been said to be quite easily found;33 there was little formal authority underpinning this statement at the time it was made, but support for it is growing34 and it is in (p. 83) tune with a modern concern with insolvency and with the abundance of property-retention devices in instalment and deferred payment contracts. The presumptive rule in section 18, Rule 1, is not as strong today as it used to be.

Former effect of rule.

3.08  Perhaps the most important reason for easing the strictness of Rule 1 was its earlier role35 in preventing the buyer of specific goods from rejecting them if the seller committed a discharging breach of contract. If the property passed at the contract date, the buyer was denied rejection rights altogether. Initially it was a question of a buyer, having paid, whose abstract enjoyment of the general property meant he could never assert the total failure of consideration that was necessary to ground an action to recover the money.36 This was because the contract had first to be rescinded ab initio before such an action could be maintained.37 Oddly, the denial of rejection was then extended to cases where the buyer had not yet paid when he sought to reject, since no sensible distinction could be drawn between non-paying and prepaying buyers.38 The apparent result was the complete denial of rejection and termination rights where the property in specific goods had passed to the buyer.39 It was never clear why the same result should not also apply where the property passed in goods initially unascertained but later ascertained.40 This position was preserved in statutory amber when the Sale of Goods Act was first enacted in 1893, at a time when developments in the general law of contract were destroying the logical underpinnings of the position.41

Exceptions to rule.

3.09  Judicial assaults on the combined effect of section 18, Rule 1, and the old section 11(1)(c) focused on language in the latter provision permitting its ouster by a contrary intention; they also raked over the meaning in Rule 1 of ‘unconditional’ and ‘deliverable state’ in decisions that are still relevant in the application of the rule. This approach began with Varley v Whipp,42 where the contract was for a second-hand self-binding reaper, new the previous season, when it had cut fifty to sixty acres, and currently at Upton where it had not been seen by the buyer. When the machine arrived by rail at its destination, the buyer found it to be old and much-used. According to Channell J, who did not explain why, the property had not passed since the contract was not ‘unconditional’.43 One possible interpretation of this ambiguous word is that the contract contains no promissory conditions,44(p. 84) which is a rather implausible creature. Less implausible is a contract that contains no promissory conditions that have been breached by the seller, which may have been what Channell J had in mind. One suggestion is that the commission of a discharging breach by the seller prevents the property passing,45 but there is nothing explicit in the Act to the effect that the passing of property is dependent upon compliance by the seller with the promissory conditions that the goods are fit for their purpose or are of satisfactory quality. The idea that ‘unconditional’ refers to the absence of a breach of promissory condition by the seller may be narrowed further to breaches of the description condition in section 13.46 In the case of specific goods, the description condition requires the seller to tender goods that conform to their contractual identity,47 a test consonant with that employed in cases of common law mistake. Hardly an exacting obligation, this would be breached where the goods supplied were different in kind from those called for by the contract. In most specific goods contracts, where the goods are seen by buyer and seller, there is normally little prospect of the description obligation being breached, but the goods in Varley v Whipp had never been seen by the buyer and their variance from the contract language was so marked that it could truly be said that the goods supplied were not the contract goods.

‘Unconditional’.

3.10  Nevertheless, the word ‘unconditional’ has to be construed as it appears in section 18, Rule 1, and not just as it might be understood in the judgment of Channell J. Its likely meaning is that it connotes an event that the parties have expressly or impliedly intended to mark the passing of property.48 Such an event is one that may or must happen after the contract date. In section 18, Rules 2–3, the property in specific goods presumptively passes when various acts of weighing, testing, and putting the goods into a deliverable state have been carried out. These, it is submitted, are events of the kind also referred to in more general terms in section 18, Rule 1, under the umbrella word ‘unconditional’. Other events could be found in the express or implied agreement of the parties, which a modern court might be readier to find in the teeth of the strong language of Rule 1. It might be agreed, for example, that the property will pass only after the buyer has had a chance to inspect or test the goods49 or upon the clearance of a cheque used by the buyer in payment.50 A conditional sale contract expressly providing that the property in goods shall pass once the buyer has paid the final instalment is a very clear case of a contract that is not unconditional.51

Section 18, Rule 2

Deliverable state.

3.11  Section 18, Rule 1, also requires the goods to be in a ‘deliverable state’, defined as ‘such a state that the buyer would under the contract be bound to take delivery of them’.52 This requirement may be seen as a specific instance of a conditional contract. It should be read with section 18, Rule 2, which provides that if specific goods have to be put (p. 85) in a deliverable state, the property presumptively passes when this is done and the buyer has notice thereof. In the cause of giving rights of rejection to the buyer of specific goods, it has been argued in the past53 that goods are not in a deliverable state if the buyer is entitled to reject them because of the seller’s discharging breach, for in such a case the buyer is not bound to take delivery. This approach is uncomfortably circular and is not good law. With the statutory changes in 1967 enhancing the rejection rights of buyers of specific goods, it is no longer needed for their protection.54

Actions of the seller.

3.12  The words ‘deliverable state’ do not depend upon the seller having a good title to the goods.55 They are sensibly to be confined to the performance by the seller of physical duties, such as packing, repair, dismantling, and servicing between the contract date and delivery. This state of affairs is dealt with by section 18, Rule 2.56 In Underwood Ltd v Burgh Castle Cement and Brick Syndicate,57 the seller of a horizontal condensing engine was to put it free on rail in London. The machine weighed thirty tons and was bolted to and embedded in concrete, and so had to be detached and dismantled before delivery to the carrier. Until this was done, it was in no state to be delivered.58 Goods are not prevented from being in a deliverable state just because the seller has yet to deliver them to a carrier: they do not have to be in a delivered state for the property to pass. Nor will the passing of property be delayed under Rule 2 if certain acts have to be performed by a third party, for example by a warehouseman as agent for the buyer.59

Notice.

3.13  Once goods have been put into a deliverable state, the buyer must be given notice of this before the property will pass under Rule 2.60 This notice is actual and not constructive, so in one case the property did not pass when the seller completed repairs to a car but failed to inform the buyer.61 Like any other presumptive rule, however, Rule 2 may be excluded by contrary agreement. This occurred in Young v Matthews62 where 1.3 million bricks were sold in return for the surrender by the buyer of a bill of exchange drawn on the seller. The seller’s foreman pointed to three clamps of finished, burning, and unbaked bricks from which delivery was to be made and responded yes to the question: ‘Do I clearly understand that you are prepared, and will hold and deliver this said quantity of bricks?’ The seller became bankrupt (p. 86) before delivery, but the court held that the property in the bricks had already passed to the buyer despite their not being in a deliverable state, a result in accord with the unusual circumstances of the case.63 In a case involving the sale of heavy second-hand machinery, the property was held to pass upon payment being made, although the machines still had to be dismantled ready for delivery. The parties had shown an implied intention contrary to Rule 2.64

Section 18, Rule 3

Weighing, measuring, and testing.

3.14  Section 18, Rule 3, provides that where, under a contract for the sale of specific goods in a deliverable state, the seller has to ‘weigh, measure, test or do some other act or thing for the purpose of ascertaining the price’, the property will not pass until this act has been done and the buyer given notice.65 This rule, said to be ‘somewhat hastily adopted from the civil law’,66 was firmly established at common law before the codification of sale. In Rugg v Minett,67 where the buyer bought at auction two lots of turpentine, whose contents could only be determined once another twenty-five lots had been topped up from the two lots, the property did not pass until this was done. Likewise, the property in a stack of bark sold at so much a ton did not pass where it had to be weighed ‘and the concurrence of the seller in the act of weighing was necessary’.68 Even where the contract is an entire one, it has been held that the property may pass in some of the goods though not the residue when the seller’s acts are incomplete.69

Nature of actions.

3.15  If the measurements have been taken leaving only mechanical arithmetical tasks to be performed, the property will pass.70 Furthermore, the acts in Rule 3 are concerned with ascertaining the price and so the rule does not apply where a lump sum for the goods, unaffected by the acts to be performed, has already been agreed.71 Rule 3 also does not apply if the acts in question, even if connected with ascertaining the price, are those of the buyer or of a sub-buyer.72

Sale or Return and Sale on Approval

General.

3.16  According to section 18, Rule 4, where goods are sent on approval or on sale or return or similar terms, the property will pass when the buyer ‘signifies his approval or acceptance to the seller or does any other act adopting the transaction’. Alternatively, it will pass if the buyer retains the goods, without notifying the seller of his rejection of them, beyond either a reasonable time or the time stipulated by the seller for the return of (p. 87) the goods. The difference between a sale on approval and a sale or return transaction is not clear-cut, though the former case seems primarily to deal with the acquisition of goods for personal use or consumption, and the latter with the acquisition of goods with a view to resale. It is not necessarily the case, however, that sale or return is for the purpose of resale73 and the true distinction between the two transactions may lie in the active duty to return goods on sale or return,74 as opposed to making them available to the seller in the case of a sale on approval.

Function of rules.

3.17  Although expressed in terms of passing of property, these are rules that have two principal functions. First, they deal in an elliptical fashion with the formation of a contract of sale, yet refer to the parties as ‘seller’ and ‘buyer’ before any contract of sale has been concluded. Secondly, they state that the property passes as soon as the contract of sale is concluded. Until that moment arrives, there is no contract of sale as defined by the Sale of Goods Act, since the ‘buyer’75 has not yet bought or agreed to buy the goods. Prior to the contract of sale, the goods are held on contractual bailment terms,76 the potential buyer as bailee having an option to purchase them. The nature of this bailment relationship between the potential buyer and the potential seller, as bailor, was examined by the Court of Appeal in Atari Corp (UK) Ltd v Electronic Boutique Stores (UK) Ltd,77 where there was unanimity that the bailment was a contractual one.78 One consequence of this analysis was that the acceptance provided for in Rule 4 converted the bailment contract into a sale of goods contract.79 Another consequence, which does not inevitably follow from analysing the bailment as contractual, is that the bailor may not withdraw the offer to sell the goods to the bailee pending the bailee’s acceptance of it in one of the ways laid down in Rule 4.80 It is not immediately obvious what consideration is provided by the bailee to give rise to an irrevocable offer to sell the goods by the bailor. It is an unlikely construction of such a relationship that, in the absence of express provision, the bailee undertakes to promote sales of the goods to sub-buyers or otherwise limits its freedom in deciding whether to accept or reject the bailor’s offer. Nevertheless, so far as sale or return provides a vehicle for financing the acquisition of stock-in-trade, which it does in certain industries, there is business sense in treating the relationship between the parties prior to the conclusion of any contract of sale as a contractual one, pending its incremental conversion into a contract of sale as quantities of goods are accepted at intervals when being sold on to sub-buyers. Sale or return may be the subject of a master agreement containing obligations to deliver and take delivery of quantities of goods from time to time, which should resolve any difficulty of consideration that might arise before individual contracts of sale are concluded.

Defeasible sales.

3.18  To be distinguished from contractual bailments of this sort are contracts of sale in which the buyer is given a wide right of rejection of the goods within a stated period. (p. 88) Although the contract of bailment in Atari Corp (UK) Ltd v Electronic Boutique Stores (UK) Ltd81 called for payment before the option date, it was not interpreted as a defeasible contract of sale. Where a binding but defeasible contract of sale has been concluded, the buyer’s entitlement to put the goods back on the seller may evidence an intention to delay the passing of property (and perhaps also the risk) until the buyer runs out of time to exercise his right of rejection.82

Issues.

3.19  The issues arising under Rule 4 are not usually (though they may be) those at stake when the passing of property is considered, such as the incidence of risk and the insolvency of either party, and the seller’s right to sue for the price. The most common issue is a title dispute between the seller and a transferee by way of sale or pledge from the buyer, where the buyer disposes of the goods without paying the seller. It is in the seller’s interest to argue that the buyer did not accept his offer in accordance with Rule 4 and so retained the status of bailee; consequently, the property did not pass to the ‘buyer’ who was therefore as a mere bailee unable to transmit title to the transferee. The transferee will be concerned to argue that a contract of sale was concluded between a seller and a buyer; the property passed and accordingly a general or special property was transferred by buyer to transferee under the later disposition.

The Buyer’s Acceptance

Forms of acceptance.

3.20  The acceptance of the buyer that concludes the contract of sale and thus triggers the conveyance under Rule 4 may take three forms: first, a declared acceptance like any other contractual acceptance; secondly, conduct that is consistent with an intention to accept the offer; and thirdly, retention of the goods beyond the time stipulated by the seller or beyond a reasonable time. This last mode of acceptance is difficult to reconcile with the rule that a contract may not be concluded by the offeree’s silence.83 The preoccupation of Rule 4 with title transfer issues, and its failure to refer explicitly to contract formation, encourages a rather literal reading of the rule at the expense of orthodox contract principle. The provisions of the Act may, of course, override the rules of common law contract. Nevertheless, since section 18, Rule 4, fails to state that the seller can stipulate for acceptance by silence, and since there is no contract of sale before the buyer’s acceptance, Rule 4 should as far as possible be read in harmony with contract formation rules,84 especially since the buyer is exercising an option.85 The buyer’s acceptance by effluxion of time should only arise if his retention of the goods can plausibly be interpreted as conduct evincing an intention to accept, bolstered perhaps by previous arrangements between the parties or by what was said by the seller when possession of the goods was given to the buyer. Taking possession of goods (p. 89) is a consensual act that can supply the necessary conduct, whereas receipt of a contractual offer is a passive affair. Even if the rules of contract formation were designed to give way to special statutory provision in this case, Rule 4 does not permit a seller to practise inertia selling on the buyer by sending goods without prior request and unilaterally defining the time of acceptance.86 Its wording turns upon ‘delivery’ to the buyer, which requires a voluntary transfer of possession.

Approval and adoption.

3.21  The first mode of acceptance in Rule 4, signifying the buyer’s approval or acceptance, is the acceptance that appears in general contract law and needs no further comment,87 but the second mode, performing an act adopting the transaction, has proved troublesome. In Kirkham v Attenborough,88 where the language of the Act was criticized, the ‘transaction’ in Rule 4 was interpreted as the agreement of sale proposed by the seller when bailing the goods to the buyer. When the latter, who had received the goods on sale or return terms, pledged them with the defendant pawnbroker, he was held thereupon to have adopted the transaction. At the very moment of the pledge, the property in the goods passed from the seller to the buyer, and the special property then passed from the buyer to the defendant pawnbroker.89 Consequently, the special property thus conveyed by the buyer to the pawnbroker was strong enough to resist the demands of the seller. In Kirkham, the court did not interpret the buyer’s behaviour in terms of an objective intention to accept the seller’s offer; rather, the court was impressed by the fact that his action was inconsistent with his ‘free power’90 to return the goods. Besides drifting somewhat from the orthodoxy of contract formation, this approach does not sit well with authority that an unauthorized sub-pledge is not as such an act of conversion.91 Similarly, apart from any fraudulent intentions of the bailee, the pledge of goods may always be redeemed and the goods returned within the stated time or a reasonable time. The Kirkham approach might also be better suited to a sale or return where the buyer sub-sells,92 since a sub-sale is the very transaction contemplated by the sale or return. It seems less suited to a pledge or to any disposition of the goods under a sale on approval, which contemplates that the buyer will use and consume the goods.

Sub-bailment.

3.22  Further light is cast on the adopting act in Genn v Winkel,93 a case involving two further sub-bailments of the goods on sale or return terms, which lends support for the following two propositions. First, the adoption by a sub-bailee of a proposed sale will feed adoptions back up the bailment chain, so that the bailee may become bound as a buyer of the goods even if not aware of the sub-bailee’s adopting act. If the sub-bailment itself were seen as equivalent to a pledge in inhibiting the bailee’s ‘free power’ to return the goods, then consistency with Kirkham v Attenborough would require a sale to be concluded earlier at the moment of sub-bailment, unless the bailor expressly or impliedly authorized the sub-bailment. More consistent with Kirkham is the second proposition from Genn v Winkel, that once the offer of a sub-bailment takes place on terms permitting the sub-bailee to retain the (p. 90) goods beyond the time for acceptance given to the bailee, then the bailee thereby adopts the bailor’s offer and becomes the buyer of the goods.94 So, if A bails goods on sale or return terms to B for fourteen days and B sub-bails the goods to C for a period stated to be longer or capable of being longer, B will at the point of sub-bailment be deemed to have accepted A’s offer.

Personal use.

3.23  A further difficulty of adoption concerns the bailee who makes personal use of the goods. Where the transaction is a sale on approval, some degree of use is contemplated by the nature of the arrangement to see if the goods are suitable for the bailee’s needs, but not, it is submitted, such use as appreciably diminishes the value of the goods, at least in the absence of clear permission to the contrary. If the transaction is one of sale or return, the transaction may on its construction permit the bailee to allow potential sub-buyers some degree of use of the goods for trial purposes. But a sale or return arrangement may become a sale if the bailee makes an unauthorized personal use of the goods.95 Any assertion of title going beyond the authority to act conferred by the bailor ought to be sufficient to adopt the transaction.96

Reasonable time.

3.24  The lapse of a reasonable time, arising under the third mode of acceptance in Rule 4, was considered in Poole v Smith’s Cars (Balham) Ltd,97 where the court, in holding that the time had elapsed under a sale or return between two car dealers, considered a number of factors, including the declining second-hand car market at that time of the year, the rapid depreciation of the car, the bailor’s repeated requests for the return of the car, and the evidently temporary (‘holiday arrangement’) character of the bailment. The question is one of fact and degree. The reasonable time in Rule 4 may elapse after the bailee has become bankrupt. The risk of this is not assumed by the bailor, so the failure of the bailee or his trustee in bankruptcy to return the goods will not mean that the property in the goods passes to the bailee as buyer and thence to the trustee.98

Bailee’s negligence.

3.25  A bailee who is negligent in looking after the goods during the option period should not thereby be seen as adopting the transaction,99 but will be liable in tort as a negligent bailee and in that capacity will bear the burden of disproving personal negligence.100 A mechanical application of section 18, Rule 4, should not be used to justify substituting an absolute contractual obligation for a duty of care in negligence, by deeming a contract of sale to be concluded by the passage of time where the bailee is unable to return destroyed goods. The result should be the same if the accident to the goods happens down a bailment chain.101 A more difficult case is dishonesty down the bailment chain. In Ray v Barker,102 the bailee was held to have adopted the transaction as a consequence of a fraudulent pledge further down the chain. Since the bailee trusts to the integrity and credit of the (p. 91) sub-bailee, however, it is surely appropriate to say that he undertakes qua the bailor to accept the risk of default of the sub-bailee, and of subsequent sub-bailees too.

Signifying non-approval.

3.26  The passage of time, whether prescribed or reasonable, is interrupted when the bailee signifies to the bailor that he is not approving or adopting the transaction. In Atari Corp (UK) Ltd v Electronic Boutique Stores (UK) Ltd,103 the court treated such conduct as equivalent to the rejection of the offer of sale and not as conduct of the buyer necessary to preserve a right of rejection of the goods under section 35.104 In that case, the bailee of a quantity of computer games had distributed them to a number of its stores and had sold some of them before taking the decision not to continue stocking the game. The bailee therefore gave notice that it intended to return the remaining games, though at the time it was unable to state how many games would be returned and the remaining games themselves had not been gathered at a central point. The bailee’s notice was effective even though it had failed to pay the price that had fallen due, some of the games had been purchased, and the precise number of games for collection by the bailor105 was not stated. Provided the goods were available for collection within a reasonable time,106 a generic notice was sufficient; the number of games being returned was capable of subsequent ascertainment.

Exclusion of Rule 4

Contrary agreement.

3.27  Since it is based upon presumed intention, Rule 4 can be displaced by contrary agreement. The lesson of Kirkham v Attenborough was learnt by the bailor of jewellery in Weiner v Gill107 where the agreement on which goods were bailed on sale or return, stated: ‘[G]‌oods had on approbation or on sale or return remain the property of Samuel Weiner until such goods are settled for or charged.’ This displayed a contrary intention, allowing the bailor to assert his title against the defendant pledgee. But Weiner v Gill was not the last word on the battle between bailor and innocent transferee. As will later be shown, words like ‘sale or return’ are not conclusive of the nature of a transaction if the court believes that on its true construction the agreement is one of agency, where the principal who owns the disputed goods is liable to be challenged by the innocent transferee on different grounds.108 Rule 4 has been excluded elsewhere because the plain intention of the parties was that the property should only pass on a cash payment.109 If the bailee declares an intention not to accept the offer, his subsequent conduct in relation to the goods has been held not to be an acceptance,110 though it could be a conversion of them.

(p. 92) Unascertained and Future Goods

Ascertainment and Existence

General.

3.28  Although the intention of the parties is paramount in the passing of property, this is subject to the goods having become existing and ascertained.111 Since the enactment of section 20A, introduced by the Sale of Goods (Amendment) Act 1995, a buyer will in some cases acquire as tenant in common an undivided share in a bulk before ascertainment of the particular goods that the seller intends to deliver under the contract.112 The incidents of this tenancy in common, which is anyway confined to special cases, are somewhat different from the general property in the goods that the buyer acquires once the rules in sections 16–19 of the Act have been satisfied. Consequently, although the 1995 tenancy in common rules have in a practical sense modified the law on ascertainment and the significance of ascertainment, the established position in the Sale of Goods Act will first be considered before attention is turned to the 1995 changes.

Existence.

3.29  Some assistance is given by the Act in determining when future goods come into existence, namely, upon their manufacture or acquisition by the seller.113 Crops and produce in an immature state should also be future goods; hence the property in grapes still on the vine will not pass.114 In a contract for the sale of a ship to be built, it is common for parties to stipulate that the property in the inchoate structure will pass as it is added to from time to time,115 and nothing in sections 5 and 16 is inconsistent with such an intention. Courts have been reluctant to give effect to clauses providing that the property will pass in materials fashioned for a ship, even before they become part of the ship by accession,116 possibly because the contract is for the sale of a ship and not of building materials, which before attachment constitute future goods.117 In the absence of contractual provision, the property will pass in materials when they are incorporated in the ship.118

(p. 93) Ascertainment

Identification.

3.30  Not defined by the Act, ascertainment119 occurs once goods have subsequently been identified to the contract in accordance with the parties’ agreement.120 Goods bought in by a seller with the intention of fulfilling a sale obligation, which thereby become existing goods, may not yet be ascertained. That will happen when they are identified to the particular contract at hand by a process of earmarking such as labelling or packaging.121 If the seller merely promises or represents that he holds the agreed goods for the buyer, this is not enough to ascertain the goods from the seller’s existing or after-acquired stock. This was the position in Re Goldcorp Exchange Ltd,122 where a seller misled investors into believing that, when they paid for precious metals, the seller would store the appropriate quantity on their behalf in a vault free of charge. The seller’s statements did not as such identify to the contract existing metals in the seller’s possession answering to the contract description or future metals coming in, in which latter case there was the added difficulty of not knowing how such metals could be allocated amongst a range of competing contracts of sale.

Bulk portion.

3.31  Goods will be treated as unascertained even if they are a fungible portion of a specific or ascertained bulk, at least until separation occurs.123 Another way of putting it is that the relevant quantity is not appropriated to the contract before separation.124 The property, for example, did not in one case pass in a quantity of newsprint where the seller retained an unascertained portion.125 A graphic illustration of this approach is Re Wait,126 where Wait agreed to sell to the buyer on c.i.f. Avonmouth terms 500 tons of Western White Wheat from a parcel of 1,000 tons shipped by one of Wait’s own suppliers on the m.v. ‘Challenger’.127 Although the buyer paid the contract sum, no property in the goods passed for reasons expressed by Atkin LJ as follows: ‘[N]‌o 500 tons of wheat have ever been earmarked, identified or appropriated as the wheat to be delivered...under the contract. The buyers have never received any bill of lading, warrant, delivery order or any document of title representing the goods.’128 Re Wait would therefore support the passing of property to a buyer of the 1,000-ton bulk receiving the bill of lading against payment but not to two cash-paying buyers of 500 tons each.129

(p. 94) Passive ascertainment.

3.32  The buyer of goods contained in a specific or ascertained bulk was sometimes fortunate even before the enactment of section 20A in 1995. In one case, ascertainment of the buyer’s share occurred by exhaustion when it was isolated after other orders from the same bulk had been executed by delivery.130 In another case, the buyers would have failed, but for the happy accident of buying from a different seller the remainder of the goods left in the specific bulk with their own unascertained portion.131 It would have been an exercise in legal pedantry to deny the buyers on the ground that neither contractual portion had been ascertained when the two taken together had been.

Sale of share.

3.33  There is no need to fulfil the requirements of section 16 where the contract is for the sale of an undivided share in specific goods belonging to the seller, rather than a severable quantity of goods in that bulk.132 Formerly, this was because the contract was not a sale of goods contract. The new definition of ‘goods’133 includes an undivided share in goods. This means that contracts for the sale of undivided shares are now governed by the Sale of Goods Act. If they are contracts for undivided shares in specific goods, they are treated as contracts for specific goods134 and will therefore continue to remain unaffected by section 16 of the Sale of Goods Act. The property in an undivided share of specific goods can therefore pass without payment being made by the buyer and thus otherwise than by means of section 20A.135 A contract for the sale of an undivided share of specific goods remains different, therefore, from a contract for the sale of unascertained goods in a specific bulk. The latter is now treated, for the purpose only of overcoming the barrier to the passing of property in section 16, as though it were a contract for the sale of an undivided share, but only to the extent of any payment made by the buyer.

Undivided share in unascertained goods.

3.34  A more difficult case is presented by a contract for the sale of an undivided share in unascertained goods, such as a 1/64 share of a ship yet to be built. Section 16 is now applicable to such a case but section 20A does not on its terms apply, since it concerns only contracts for the sale of a ‘specified quantity’ of unascertained goods. In this case, there is no clear way to avoid the conclusion that, as a result of legislative change, the property can never pass in such cases, except by means of an act of transfer effected once the goods have come into existence. In other cases, such as the (unlikely) contract for the sale of half of a cargo to be shipped at a future date, it may be possible to arrive at a ‘quantity’, whether the amount to be shipped is known in advance or not, so as to bring the contract within the terms of section 20A. The goods shipped will be capable of enumeration and their parts fungible. Whereas one soya bean in a shipment may be interchangeable with another, however, the same cannot be said for the parts of a ship.

(p. 95) Overcoming Section 16

Attempts to avoid Section 16.

3.35  The seller in Re Wait did not provide the buyer with a delivery document of any kind, though in c.i.f. contracts payment is usually net cash against shipping documents. Suppose, however, that a seller performs all his personal obligations136 under a contract where the goods are held in an undivided bulk by a carrier or warehouseman.137 The buyer of unascertained goods may benefit from a personal estoppel against a third party,138 such as a warehouseman who attorns to the buyer139 when the buyer’s quantity has not yet been ascertained. May the seller’s performance of his obligations also give rise to proprietary entitlement? In one case concerning the risk of adulteration of white spirit, the Court of Appeal departed from the ‘lump’ concept of title in holding that, notwithstanding the property remaining in the seller, the risk had passed to the buyer from the time when the buyer could have called for delivery of his portion of the bulk.140 It does not necessarily follow, however, that the same approach could or should be adopted in cases of seller insolvency. Yet Blackburn J once said that he was ‘very much inclined to struggle very hard’ to prevent the ‘monstrous hardship’ of a windfall benefit to the seller’s creditors in such circumstances.141 Before the enactment in 1995 of section 20A, attempts to assist buyers by overcoming the section 16 impediment to the passing of property were made with the assistance of equitable ideas142 and the common law notion of tenancy in common.143 These attempts proved unsuccessful for reasons now to be considered.

Equitable Property Rights

Pre-Act authorities.

3.36  Although Re Wait is an apparently decisive authority against the buyer acquiring equitable rights to the contract goods by operation of law,144 it is worth tracing the antecedent law before the case is considered at length. Before the codification of sale, the Privy Council had held that a seller purportedly negotiating a non-negotiable bill of lading in favour of a bank had nevertheless succeeded in conveying an equitable title.145 Although not a case of unascertained goods, this decision was significant in applying equitable proprietary (p. 96) principles where the seller had intended but failed to transfer a legal proprietary right. It might yet be significant where a seller transfers a bill of lading to an undivided part of a bulk with the intention of passing the general property in the quantity covered by the bill of lading to the buyer.146 There were other pre-codification decisions from which a buyer of unascertained goods could draw considerable comfort. In Hoare v Dresser,147 a broker, acting as the del credere agent of a seller of three cargoes of timber, accepted a number of the seller’s drafts, in return receiving copies of the charterparties of two of the vessels carrying the goods and the promise of bills of lading when the loading was completed. The House of Lords held that he acquired an equitable interest in the goods upon loading even though he never received the bills of lading. Furthermore, in the leading case of Holroyd v Marshall,148 a textile manufacturer, as security for a debt, assigned by way of mortgage149 all present and future machinery in the mill until the debt was paid. The House of Lords held that the creditor had automatically acquired an equitable interest in the future machinery upon its acquisition by the debtor, since a court of equity would order the performance of the contract to assign the machinery. At law, a deed assigning future property was, to the extent of that property, void in law150 and a fresh conveyance of each item of machinery would be required as and when it came into existence.

Promise to assign.

3.37  Equity gave effect to a purported present assignment of future property by treating it as a promise to assign the goods.151 Treating that as done which ought to be done, equity viewed the contract to assign as a perfected assignment as soon as it was able to ‘fasten upon’ the goods, that is, upon their coming into existence.152 Even if this event occurred during the assignor’s insolvency, the equitable assignment would take effect.153 An issue never adequately resolved was whether the promise to convey had to be linked to the completed assignment by compliance with the doctrine of specific performance. In Holroyd v Marshall,154 Lord Westbury said that the assignee was entitled to relief provided the contract was such ‘as a court of equity would direct to be specifically performed’.155 On the face of it, this limitation would give little scope for equitable assignment in commercial sales contracts where goods almost always lack the unique quality needed if the discretionary remedy of specific performance is to be successfully invoked.156 Furthermore, the law is also reluctant to grant specific performance outside cases of specific or ascertained goods.157

Specific performance issues.

3.38  Lord Westbury, nevertheless, gave as an example of a valid equitable assignment a contract for the sale of ‘five hundred chests of the particular kind of (p. 97) tea which is now in my warehouse in Gloucester’,158 which, not without some ambiguity, is a contract for the supply of an unascertained part of a specific bulk. This example, using commonplace goods, tells against taking too literally the reference to specific performance, and alone should be enough to refute the argument that equitable rights may only be assigned where the remedy of specific performance is available. Yet Lord Westbury’s example was phrased in another report quite differently as one for the sale, not of an unascertained part of a specific bulk, but of specific goods.159 Even if the claimant is able to surmount the specific performance barrier, however high it is erected, more recent authority denies that the availability of specific performance necessarily means that the buyer has an equitable interest in the subject matter of the contract.160 In the later case of Tailby v Official Receiver, Lord Westbury’s specific performance limitation was interpreted as confined to the particular example he used to show that equitable rights are more than shadowy things.161 Another attempt to neutralize Lord Westbury’s words came in a case where Cotton LJ stated that the specific performance limitation applied only where the contract was wholly executory and not where the assignee had already performed his part of the bargain, for in such a case damages would not be an adequate remedy.162 A better approach, therefore, would have been to treat the reference to specific performance as merely an instrumental matter, with equity intervening only because it would regard as done something that ought to be done. This reasoning would apply where the buyer had paid the price.163 Prior to the passing of the Sale of Goods Act in 1893, the prospects for a prepaying buyer therefore appeared encouraging.

Re Wait

The transaction.

3.39  The effect of the Act on equitable proprietary rights in sales law was considered in Re Wait.164 The prompt date for payment by the buyer was thirty-three days after Wait had sight of the bill of lading (which covered the whole parcel of 1,000 tons) from his own seller. Although this seemed a normal c.i.f. contract, where the buyer might have demanded a documentary tender that included a bill of lading,165 the buyer paid the seller after being invoiced for the agreed sum without receiving a bill of lading or indeed any other delivery document. Wait hypothecated the bill of lading to his bank as security for his overdraft and paid the price received from the buyer into his general account. The bank, acting unilaterally, transferred this credit item a few days later into a separate loan account that had been debited with the sum advanced to Wait upon the hypothecation. Before delivery of the 500 tons could be made to the buyer, Wait was made bankrupt and the official receiver’s representative obtained the bill of lading by discharging the debt from the loan account, thus (p. 98) leaving the buyer’s payment as a credit. At no material time did the 500 tons due to the buyer ever become separated from bulk.

Summary.

3.40  The trial judge declined to award specific performance of the contract but held that the buyer’s payment was trust money earmarked for a special purpose and so should be repaid to the buyer.166 The Divisional Court in Bankruptcy, however, ordered specific performance but the Court of Appeal by a majority overturned the award on the ground that the goods had never become ‘specific or ascertained’ for the purpose of section 52 and specific performance.167 It further held that the buyer had no equitable property in the 1,000 ton bulk.168 No argument relating to a trust of the purchase money was made by the buyer by the time the action reached this stage.

Reasons of majority.

3.41  Of the majority judges, Lord Hanworth MR pointed to the specific performance limitation in Lord Westbury’s judgment in Holroyd v Marshall169 and held also, in effect, that an equitable appropriation would have to pass the test of ascertainment in section 16.170 Atkin LJ too referred to Lord Westbury and held also there could be no equitable assignment of the buyer’s 500 tons enforceable by equitable lien or charge over the 1,000 ton bulk arising from ‘the mere sale171 or agreement to sell’.172 The Act was a complete codification of property rights arising out of the contract of sale:

It would have been futile in a code intended for commercial men to have created an elaborate structure of rules dealing with rights at law, if at the same time it was intended to leave, subsisting with the legal rights, equitable rights inconsistent with, more extensive, and coming into existence earlier than the rights so carefully set out in the various sections of the Code.173

3.42  Furthermore, to grant the relief sought by the buyer would ‘also appear to embarrass to a most serious degree the ordinary operations of buying and selling goods, and the banking operations which attend them’.174 Despite Atkin LJ’s concerns, however, it is surely not too important to worry about the bank advancing money to the seller against a pledge of the shipping documents.175 If the bank has notice of the equitable interest granted to the buyer, it is forewarned and can take its own precautions; and if it is not aware of this interest, its own special legal property will prevail against or override176 the buyer’s equitable interest.

(p. 99) Express equitable rights.

3.43  Atkin LJ did concede that a ‘seller or a purchaser may, of course, create any equity he pleases by way of charge, equitable assignment or any other dealing with or disposition of the goods, the subject matter of sale; and he may of course create such equity as one of the terms expressed in the contract of sale’.177 No such special provision had in his view been made in the present case.178 Nor did he feel drawn to intervene in favour of the buyer on grounds so inherently vague as dishonesty (or, supposedly, equitable fraud). The general hostility of Atkin LJ’s remarks towards the equitable infiltration of commercial law, however, has succeeded in concealing his concession that the parties could create equitable rights under a contract of sale if they put their minds to it in the proper way. But to the extent that equitable rights would create real impediments to the operation of the seller’s activities, as they would if they encumbered a portion of the seller’s trading stock,179 a court would require a great deal of persuading that equitable rights were genuinely intended by the parties.180

Reasons for dissent.

3.44  Sargant LJ, dissenting in Re Wait,181 plainly believed that Wait had appropriated the particular cargo of 1,000 tons from which to fulfil his sale obligations to the buyer. He considered that an equitable interest would have passed to the buyer from the time of appropriation if the buyer had agreed to buy the whole of the 1,000-ton bulk, and the same conclusion should follow on the present facts, since in both cases it would be fraud or dishonesty for the seller to divert the wheat from the contract with the buyer.182 Equitable assignment, in his view, was not tied to the doctrine of specific performance and, though the 500 tons had never been ascertained, they were nevertheless ascertainable at the time when it was sought to enforce the contract.183 Finally, the Sale of Goods Act had not put paid to equitable interests arising out of sale of goods contracts and the equitable assignment could be implemented by specific performance since the goods in question could be regarded as ‘specific goods’ under section 52.

Effect of Re Wait.

3.45  For practical purposes, Re Wait put an end to the idea of an implied equitable assignment in sale of goods,184 despite a majority view that the result would have been different if the seller had undertaken to deliver the buyer’s 500 tons out of the 1,000 tons for which he held a bill of lading.185 Recent confirmation of the effect of Re Wait comes from the Privy Council decision in Re Goldcorp Exchange Ltd,186 which also stands for a refusal to (p. 100) infer a fiduciary relationship from ordinary contractual dealings or to impose constructive trust, equitable lien, and restitutionary proprietary rights simply because the seller has failed to abide by his promises and representations regarding the holding of earmarked goods for the buyer. From the buyer’s point of view, this case was weaker on its facts than Re Wait, since there was no question of an identified bulk to be charged with equitable rights.

Tenancy in Common

Co-ownership.

3.46  It is noteworthy that the Law Commission, when it considered the problem of insolvency and bulk goods, recommended a reform favouring the prepaying buyer based, not upon equitable ideas, but upon the common law doctrine of tenancy in common. Such a buyer, unless the parties otherwise agreed, would obtain an undivided share in an identified bulk, until his share was separated in the normal course.187 The Commission’s proposal was that tenants in common of the bulk would share rateably any shrinkage of the bulk, but that any of them removing or receiving his contract quantity from the bulk should be protected from liability to other tenants suffering a shortfall.188 The recommendations of the Law Commission were enacted as changes to the Sale of Goods Act in 1995,189 though the expression ‘tenancy in common’ appears nowhere in the legislation. It is clear, nevertheless, that under the statutory changes qualifying buyers receive a legal and not an equitable interest in the bulk.

Intention and co-ownership.

3.47  The position before the 1995 changes, where there was a specific or ascertained bulk and various unsatisfied buyers therefrom, was that those buyers could not simply be treated as tenants in common of the undivided bulk.190 It was not enough that the seller’s creditors would obtain a windfall benefit from the accident of non-ascertainment from the bulk, or that the several buyers had a common interest, or at least no adversity of interest, in the face of the seller’s insolvency. Nevertheless, in Re Stapylton Fletcher Ltd,191 decided after the Law Commission report, it was held that, just as a tenancy in common can be imposed by law in the case of a wrongful mixing of goods,192 so there was nothing to prevent the parties impliedly or expressly agreeing for the seller to hold the buyer’s goods mixed in common with those of other buyers as the relationship of seller and buyer was converted from one of sale into one of storage.193 In that case, sellers of wine located in one of their warehouses, exercising rigorous stock controls, conscientiously segregated cases of wine that they held in stock, the subject of various contracts of sale, by removing the wine from their ordinary trading stacks and transferring it to their warehouse stacks.194 Even though (p. 101) there was no evidence that individual buyers’ wines had been earmarked and isolated from the same wines of other buyers for the purpose of, or in the process of, transfer into the warehouse stacks, the court held first that the wines of those buyers had thereby been ascertained under section 16. Consequently, the way was open for the property to pass to individual buyers in accordance with the intention of the parties before the wines were submerged in a common warehouse pool.195 The test of ascertainment was to be understood differently and less rigorously where sellers made a constructive delivery to themselves as warehousemen as opposed to an actual delivery to the buyer.196 A less controversial feature of the case was the next step taken by the court, namely, the inference from the parties’ conduct of a tenancy in common of the wine in the warehouse stacks. This conclusion was reached even though the cases of wine in those stacks were not allocated to particular warehousing contracts and there was nothing to show to which warehousing contract individual cases of a stated type and vintage of wine belonged. The meticulous records of the warehouse, however, revealed the names of those who were entitled in gross to share those cases. In the event of loss or breakages in the common warehouse pool, each buyer would bear the burden rateably with the other tenants in common according to their respective shares. The tenancy in common result in this case is equally applicable to goods delivered by the seller and mingled with identical or compatible goods of the buyer, in circumstances where the seller does not intend to pass the property in the goods to the buyer.197

Ascertainment by documentary means.

3.48  The interpretation of the seller’s actions in the case just described as amounting to ascertainment was generous to the buyers, but the way that the court in Re Stapylton Fletcher Ltd dealt with the sale of other, en primeur, wines ordered from foreign growers in the names of individual buyers was more generous still. A stock certificate accompanied the wines delivered to the sellers into a bonded warehouse and the sellers recorded the entitlements of individual buyers in a master index. The sellers then notified the warehouse of the individual buyers’ entitlements. At no material time did the sellers physically touch, move or separate the wines in a way that could be construed as ascertainment under individual contracts of sale, yet the court treated the sellers’ actions as amounting to ascertainment. The Court of Appeal in Customs and Excise Commissioners v Everwine Ltd198 noted that the sellers at no time held wines of their own in the bulk designated for their various buyers and limited the effect of Re Stapylton Fletcher Ltd in the following way. In Everwine, the buyers acquired no property rights because the goods destined for them did not exhaust all of the stocks in the name of the sellers in the bonded warehouse. The documentary actions of the seller in a case like Re Stapylton Fletcher Ltd, therefore, will be an effective ascertainment only if the seller has no goods of its own or if its own goods have first been physically separated from those destined for buyers. Moreover, the response of the court in Everwine suggests that Re Stapylton Fletcher Ltd, in its application to the en primeur(p. 102) wines, might be open to challenge in a higher court. In any case, the special features of Re Stapylton Fletcher Ltd render it of little assistance in cases like ReWait, where the application of section 20A199 is likely to provide more assistance to buyers.

Buyers and Insolvent Sellers

Reasons for assisting buyer.

3.49  Before we turn to the 1995 amendments to the Sale of Goods Act, it is useful to consider a further aspect of the case for intervention on behalf of the buyer. If section 16 may not be applied200 in a way favourable to the buyer, then any intervention on his behalf, by means of equitable rules or by statutory means, should not be a matter of mere legal technique under broad rubrics such as ‘fraud’ and ‘dishonesty’. It should as a matter of principle be asked why the buyer should rank ahead of the insolvent seller’s other creditors.201 The Law Commission did assert that ‘insolvency law has to accept the rules of property law as it finds them’202 and implied that removing anomalies from existing law does not interfere with the rules of distribution on insolvency.203 But it is difficult to see a proposed major reform, prompted by a report dealing with the problems raised by a long-established body of law, as responding to a mere anomaly. There is much to be said in this area of law for confronting the issue of insolvency head on. The best starting point for preferring the prepaying buyer is Atkin LJ’s statement in Re Wait:

If a seller of goods delivers them to a buyer before payment, trusting to receive payment in due course, and the buyer becomes bankrupt, the seller is restricted to a proof, and can assert no beneficial interest in the goods. There seems no particular reason why a different principle should prevail where a buyer hands the price to the seller before delivery of the goods trusting to receive delivery in due course. In both cases credit is given to the debtor, and the buyer and the seller take the well known risk of the insolvency of their customer.204

A seller who delivers the goods before payment is well able to see the risk and guard against it by reserving the general property. The prepaying buyer is not so well positioned and may be unaware that his goods are unascertained or form an undifferentiated part of a bulk.205 A matter of critical importance raised in this passage is whether ‘credit’ is granted by the prepaying buyer to the seller or, more accurately, whether the buyer advances money to the seller with the intention of financing the latter’s business, accepting the risk of relegation to the status of an unsecured creditor if he does not actively bargain for a security. In Re Wait, the buyer did not advance the price to permit Wait to obtain the goods from his supplier. The contract was an ordinary c.i.f. transaction contemplating the transfer of the general property, through the medium of the bill of lading, against payment. It is arguable that the adventitious circumstance of the contract quantity being submerged in a larger bulk baffled the expectations of the parties that the buyer would become the owner of the contract goods upon payment. Credit is not the practice in commodity transactions and a case can be made for intervention in favour of the buyer where otherwise the seller’s creditors would obtain (p. 103) a windfall benefit. Those who take an insolvency risk commonly charge a premium commensurate with the risk, which is not the case with prepaying buyers of part of a bulk cargo.

Instalment sales.

3.50  It is easily overlooked that one example of a prepaying buyer who does not extend credit to the seller, and indeed receives it from the seller, is the buyer on instalment terms, where the seller retains the general property until payment in full has been made. Canadian cases on conditional sales, seemingly attracted by the analogy of a security bill of sale where the grantor has an equity of redemption in the goods, support the view that an equitable or other limited interest, measured by the instalments paid from time to time, passes to the buyer.206 These cases are consistent in approach with, but go beyond, English hire purchase cases, allowing the finance company, in a conversion action against a third-party tortfeasor, to recover only damages limited to the unpaid balance on the hire purchase agreement.207 The normal conversion award, based upon the value of the goods,208 would be more consistent with the legal structure of the hire purchase agreement, under which the finance company retains the full beneficial and legal ownership until the hirer can and does exercise the option to purchase.209

Sale of Goods (Amendment) Act 1995

Statutory change.

3.51  Rather than build upon notions of equitable proprietary entitlement, the Sale of Goods (Amendment) Act 1995210 implemented the tenancy in common proposals just described of the Law Commission. The amendments and additions made to the Sale of Goods Act211 are expressed in the language of co-ownership and not expressly in the language of tenancy in common. They cannot be taken to codify all circumstances where a tenancy in common will arise so as to prevent a buyer from invoking tenancy in common outside the legislation.212 It is, nevertheless, unlikely that a buyer will have to do so and unlikely that a court will accede to a tenancy in common claim that does not fulfil the requirements of the Act.

Required conditions.

3.52  Section 20A of the Sale of Goods Act 1979 provides that, where ‘the goods or some of them form part of a bulk’, the buyer acquires an ‘undivided share in the bulk’ and becomes an owner in common of the bulk213 unless the parties agree otherwise. Three conditions have to be satisfied before this proprietary interest arises. First, there must exist a (p. 104) ‘bulk’, which is defined as ‘a mass or collection of goods of the same kind which...is contained in a defined space or area...and is such that any goods in the bulk are interchangeable with any other goods therein of the same number or quantity’.214 A number of issues present themselves at this point. First, there is the requirement that the goods be of the same ‘kind’, a word that is too narrow to include grade and quality, but that ought not to be understood in too restrictive a way.215 Crude oil, for example, may be mixed, accidentally or otherwise, in different grades to produce a hybrid blend. There is no reason why this event should prevent a buyer from acquiring a co-ownership right, even though it may be practically impossible to extract from the blend goods of the description bound for the buyer under the contract. The crude oil that has been mixed remains crude oil. If the blend is not in conformity with the contract requirements, the buyer may be able to terminate the contract consequent upon a breach of section 13 or 14 of the Sale of Goods Act, but the existence of a right to terminate ought not to prevent the property first passing to the buyer in the relevant undivided share. A breach of sections 13 or 14 does not prevent the general property from passing in non-bulk cases.216 A further point relates to what constitutes a defined space or area. A pragmatic interpretation of this phrase would confine its operation to cases where the size of the bulk can be computed by practical means. If this cannot be done, it is hard to see how the area can be treated as a ‘defined’ one. The seller’s general trading stock will not as such constitute a bulk for the purpose of these provisions,217 not least because it lacks definition and would lead to a conclusion that a bulk existed in all, or nearly all, cases.218 A defined ‘space’ will usually and without undue difficulty be referable to a named warehouse or ship, but a defined ‘area’ could be large enough for a real difficulty to arise in applying section 20A. A seller may state that it is holding goods for the buyer on its premises without stating precisely where, though both parties may know that the seller has only one, albeit extensive, site. This is not quite a case of the seller’s general trading stock and the site ought therefore to be a defined ‘area’.219 There would have to be goods of the kind on the seller’s site at that time. A promise to hold goods should not suffice, even if goods of that kind later come to the site.220

3.53  The second condition for a proprietary interest is that this bulk must be identified in the contract or by subsequent agreement between the parties. A difficult case, common in international commodity sales, is that of the seller who issues a notice of appropriation (or declaration of shipment) indicating the buyer’s goods by reference to a dated bill of lading, the weight of goods shipped under that bill of lading and the name of the ship. Of itself, this notice will not identify a particular hold of the ship or portion of the ship’s cargo. Unless the reference in the notice to the ship is judged sufficient to identify the bulk, an undivided share would not pass to the buyer.221 The date of the bill of lading will in many cases at least give a sufficient indication of the hold in which the goods have been shipped. It would go too far (p. 105) in such a case to say that the bulk amounted to the entire contents of a ship with more than one hold if the remaining holds were filled with shipments under separately dated bills of lading. This conclusion, however, may have to be reached if the contents of each hold cannot be attributed to one or more particular bills of lading. As for the contents of a particular hold, suppose, now, that the seller appropriates to a contract a quantity of wheat shipped under a bill of lading of a certain date, but the wheat represented by the bill of lading, destined for two or more buyers, is emptied into a hold where it is mixed with wheat shipped under a different bill of lading. The bulk should be the contents of the hold since the scheme of the new provisions would be unworkable if the bulk were confined to the quantity shipped under the particular bill of lading.

3.54  The third condition demanded by section 20A before the buyer will acquire an undivided share is that the buyer must have made payment for that share. In international commodity sales where goods are shipped in bulk and documents are exchanged for payment before the bulk is broken, payment will usually be made against the transfer to the buyer of a ship’s delivery order containing an undertaking by the ship to deliver a stated quantity of goods to the holder of the order.222 The undertaking of the ship to surrender the relevant cargo, which makes the delivery order effective, will have been given upon the surrender by the seller to the ship of one or more bills of lading. The receipt by the buyer of the delivery order will therefore be predicated upon the identification of the bulk by that bill of lading.

The buyer’s share.

3.55  Certain matters deriving from the implementation of the provisions of the 1995 Act are dealt with in the same legislation. First of all, the size of the buyer’s share is stated by section 20A(3) to be a rateable one, corresponding to the ratio between the bulk and the quantity of the goods for which payment has been made by the buyer.223 The buyer’s ratio, thus expressed in quantitative terms, would therefore not take account of a change in the quality or type of the bulk produced by a mixing of different grades or qualities. This means that the buyer should have a proprietary claim for a quantity whose overall quality is higher than the contract quality, if the blending process has produced a grade superior to the buyer’s contractual entitlement, but only a lower quality if the resultant grade is inferior to the buyer’s entitlement. In this latter case, the buyer who affirms the contract after a breach of condition by the seller will have a damages claim under section 53 of the Sale of Goods Act. In cases of part-payment, the legislation provides that any ‘delivery’ out of the bulk to such a buyer will be ‘ascribed’ to that payment.224 Under sections 20A and 20B, ‘delivery’ has the extended meaning of ‘such appropriation of goods to the contract as results in property to the goods being transferred to the buyer’225 and so can take place without possession being transferred physically or constructively to the buyer.226 Even so, the delivery that takes place in a part-payment case is likely to be a physical one. Suppose now that the buyer has paid in full but delivery only in part has been made. The effect of this part delivery is that any undivided share that the buyer might have in the remaining bulk will be commensurately diminished227 to the extent of the goods paid for but not yet delivered. The buyer’s lost (p. 106) divided interest is in effect substituted by the general property in the delivered goods.228 The buyer’s property interest, whether it takes the form of an undivided share or the property in goods or both, will not by virtue of sections 20A–B exceed the payment made, except for those cases where separation of the buyer’s full contractual entitlement from the bulk leads in accordance with the parties’ intention to a passing of the general property in an amount that exceeds the quantity attributable to payment made by the buyer.

Shrinkage.

3.56  The next matter arising from section 20A concerns shrinkage in the bulk, which could occur for various reasons including natural wastage, theft, or default of the seller. In the case of co-owners, the normal rule is that shrinkage affects the shares of all co-owners rateably.229 Section 20A(4), however, provides for abatement only when the buyers’ shares in the bulk exceed the quantity of the bulk. No specific mention is made of sellers who might also have an interest in the bulk. The question now is whether it is the intention of section 20A(4) that the seller’s interest abates before those of the buyers. Take three cases. In the first, S is an intermediate party in a sales string, holds a bill of lading for 100,000 gallons of vegetable oil, and has contracted to sell 40,000 gallons each to B1 and B2, who have acquired undivided interests in the bulk. In the second case, S holds a bill of lading for 80,000 gallons and, in addition, has at the last moment shipped a further 20,000 gallons to avoid having to pay deadfreight charges to the shipowner.230 In the third case, B has acquired an undivided interest representing 60,000 gallons in a 100,000 bulk, the remaining 40,000 gallons being due to S. B sub-sells 20,000 gallons each to Sub-B1 and Sub-B2. Suppose now that in all three cases the bulk shrinks by 20,000 gallons. If section 20A(4) is applied literally, then S in the first example bears the entire loss of 20,000 gallons since section 20A(4) does not yet mandate a shrinkage of the parts that are due to B1 and B2. In the second case, the same result would follow, even though it is a matter of accident that the bulk now consists of 100,000 gallons instead of the 80,000 gallons provided for in the bill of lading. By shipping the extra 20,000 gallons, S unwittingly gave B1 and B2 a form of proprietary insurance. In the third case, B is both a buyer and a seller. If only the relations of B, Sub-B1, and Sub-B2, are considered, the shrinkage will be borne in full by B. If only the relations of S and B are considered, S will bear in full the shrinkage. If all parties are taken together, and if B is treated only as a buyer, S will bear in full the shrinkage. Whichever approach is adopted, the shrinkage is borne by S. If section 20A(4) intentionally provides for the seller’s interest to abate first, then it does so in an elliptical style not usually associated with modern parliamentary draftsmanship. Moreover, it does so without any attempt to relate this outcome to the notion of risk and section 20. The normal rule in c.i.f. contracts, for example, is that the risk falls on the buyer as from shipment.231 For S to bear in full the consequences of shrinkage would seem to upset this entrenched rule. To say that S bears the proprietary consequences of the shrinkage under section 20A(4), yet as a matter of contract is still able to insist upon payment in full, is incoherent. Even if the risk of loss was under the contract on the seller, the expropriation of the seller could not be justified as a matter of risk allocation in relation (p. 107) to non-contract goods, such as those shipped to avoid deadfreight charges, which are not the subject of any of the contracts of sale. A contrasting approach to section 20A(4) is that it makes the factual assumption that the only persons entitled to the bulk are all buyers. Where the seller retains an interest, the normal co-ownership rules of rateable abatement should then apply. Little assistance comes from the Law Commission report. It deals with sellers and shrinkage in relatively brief terms and, whilst providing some comfort for the literal interpretation of section 20A(4), the main concern of the relevant passage in the report appears to be with shrinkage occurring before the seller concludes contracts of sale.232 It is therefore submitted that section 20A(4) is simply illustrative of the way normal co-ownership rules apply where only buyers have an interest in the bulk233 and is not intended to expropriate sellers without any regard being paid to the allocation of risk of loss between seller and buyers. This accords with the presumption against statutes having an expropriatory effect on vested property rights where the statute does not expressly sanction expropriation.234 As far as the seller does not remove his own portion from the bulk but is negligent as a bailee in conserving the bulk, there is similarly no good reason to attribute that negligence first of all to the seller’s own portion. The appropriate response would be to give the other co-owners an action in negligence against the bailee seller, as would be the case if the risk of loss had been transferred to the buyer and as would be the case if the bailee were a third party. As against the seller, the buyer would also be able to assert equitable set-off rights against a seller claiming payment.

Deliveries out of bulk.

3.57  Section 20B provides for two cases. Taking them in the reverse and logical order,235 section 20B(1)(b) provides that a person who has become an owner in common of the bulk by virtue of section 20A consents to ‘any dealing with or removal, delivery or disposal of the goods’ by any other person who is a co-owner, ‘so far as the goods fall within that co-owner’s undivided share in the bulk at the time of the removal, dealing, delivery or disposal’.236 Persons who become co-owners under section 20A certainly include buyers, but they include sellers too, to the extent that their general property is reduced to co-ownership by the operation of section 20A. This broad provision could include dealings between a buyer and a sub-buyer.237 It could also include the case of a seller, with rights of co-ownership in the bulk, who allows a buyer to have delivery of goods in the bulk when that buyer’s failure to pay means that he has not acquired co-ownership rights under section 20A(2). A consent given by other co-owners to the seller’s action entails a consent to the transfer of the seller’s property rights to that buyer, even though that buyer does not acquire property rights under section 20A. Delivery, in its expanded definition, includes ‘such appropriation of the goods to the contract as results in property in the goods being transferred to the buyer’.238(p. 108) That said, section 20B(1)(b) is designed to have only a limited impact, namely, to avoid the need for a co-owner, in the absence of agreement, to remove his portion without an application to the court.239 It is capable of overlap with section 20B(1)(a) which, in dealing with deliveries out of the bulk to a co-owner in respect of his contractual entitlement,240 goes beyond section 20B(1)(b), which is confined to the delivery of goods to which the buyer is proprietarily entitled.

3.58  According to section 20B(1)(a), a person becoming entitled to co-ownership rights by virtue of section 20A is deemed to consent to ‘any delivery of goods out of the bulk to any other owner in common of the bulk, being goods which are due to him under his contract’. This formula excludes sellers, unless as intermediate parties in a sale string they can also claim to be buyers. If, at the buyer’s request, the delivery is made by the seller directly to a sub-buyer, this case should come within section 20B(1)(a). This is because delivery to the sub-buyer is a truncated process of delivery to the buyer and sub-delivery to the sub-buyer, a process that has been recognized for the purposes of section 25 and should be recognized here.241 The sub-buyer would therefore succeed to the position of the buyer under section 20B(1)(a). A sub-buyer taking direct delivery from the seller should be no worse off than a buyer taking delivery. Sub-section (2) goes on to provide that no cause of action shall accrue as a result of action sanctioned under section 20B(1)(a) (sub-section (1)(b) too). The formula is wide enough to protect sellers making deliveries to buyers, as well as third parties such as warehousemen and carriers.242 But the consent extends also to the buyer himself, since delivery is the voluntary transfer of possession from one person to another.243 A buyer receiving delivery in full in this way is not required to indemnify fellow co-owners, who will therefore bear a disproportionately large share of any shrinkage that has occurred in the bulk.244 The Law Commission favoured a ‘first come, first served’ rule.245 It did not consider the case of the buyer demanding his contractual entitlement whilst knowing that, as a result of shrinkage, his proprietary entitlement is less. This is, perhaps, an unlikely case, but the Law Commission clearly favoured a rule based on the finality of any delivery made out of the bulk.246 As the statute stands, the buyer’s acquisition of an expanded proprietary right in consequence of section 20B(1)(a) cannot be challenged on the basis of the buyer’s knowledge of the true position. A remaining buyer receiving short delivery as a result of the operation of section 20B(1)(a) is not in a position to make a claim against the seller if the contractual risk of shrinkage at the relevant time was on the buyer.247 In such a case especially, section 20B(1)(a) provides for a plainly undesirable outcome.

(p. 109) Protecting third parties.

3.59  Section 20B(2) goes on to state that ‘[n]‌o cause of action shall accrue to anyone against a person by reason of that person having acted in accordance with’ a delivery to an owner in common of goods to the extent of his share, or removal, delivery or disposal by an owner in common to the extent of his share. This provision is particularly apt for dealing with the case of a buyer receiving more than his proprietary entitlement. It protects both sellers and third parties assisting in these transactions from tortious liability. As regards third parties, section 20B(2) amounts largely to an abundance of caution, since carriers, warehousemen, and stevedores are already protected at common law from liability in conversion when performing actions that, so far as they know, have no transfer of title implications.248 There are, nevertheless, limits to the protection afforded by section 20B(2). The contractual rights of a buyer benefiting from the various proprietary rights conferred by sections 20A–B remain unaffected by the legislation.249 Consequently, section 20B(2) will not protect sellers from the contractual consequences of short delivery.250 Furthermore, while a carrier who has delivered the full bill of lading quantity to a co-owning buyer will be protected from tortious liability to another co-owning buyer receiving a shortfall, a carrier who signs a bill of lading for a certain amount will still be contractually liable to deliver that amount to that latter buyer as the holder of the bill of lading.251

Undivided shares and general property.

3.60  Additional features arising from the 1995 changes to the Sale of Goods Act should also be mentioned. First, although it does not say so explicitly, the Act creates an interim position252 in the passing of property from seller to buyer: the buyer’s undivided share as tenant in common of the bulk will fall between having no property rights and having the general property in the contract goods. It can normally be expected that, with the separation of the buyer’s goods from the identified bulk, the requirements for the passing of the general property will either already have occurred or will thereupon occur. The general property in such cases will therefore supersede the buyer’s undivided interest. Suppose, however, that the test for the passing of the general property, whether prescribed in the contract or arising under section 18, Rule 5,253 has not been satisfied. Once the buyer’s contractual portion has been separated, the buyer can no longer have an undivided interest in the bulk. If the contract contains a provision that the property will only pass upon payment in full, and the buyer pays half of the contract price, the possibility arises that the buyer will qualify for an undivided interest corresponding to half of his contractual entitlement. If that entitlement were to disappear as a result of the actions of the seller or an agent of the seller, in separating the buyer’s portion, it would be most unsatisfactory for the buyer to be deprived altogether of proprietary rights. A likely construction of the contract, however, is that the reservation of title clause manifests a contrary intention to the acquisition by the buyer of an undivided interest in common. An undivided interest is acquired under section 20A once the conditions laid down in the section are met and ‘unless the parties agree otherwise’. A more difficult case is where section 18, Rule 5, might require physical delivery to the buyer for the property to pass,254 the contract is silent on the passing of property, and separation of the (p. 110) buyer’s portion occurs before physical delivery to the buyer. Such might occur, for example, where the seller’s contract contains an undertaking to transport and deliver a quantity of goods on shore. It would be a curious property right of the buyer’s if it could be unilaterally divested by the seller when separating the buyer’s portion. The seller would thus re-invest himself with the general property in the goods by his own act. The most practical solution to this problem would be to recall that section 18, Rule 5, is a rule of presumptive intention. If there is nothing to repel the acquisition by the buyer of an undivided interest under section 20A, the buyer’s interest should not be forfeited as a result of the presumed intention that arises under Rule 5 and the buyer should retain a co-ownership interest in the separated goods. To give the buyer the general property in the separated goods would be an excessive response, even though the seller will have a lien over the goods until payment has been made255 and a contractual right to resist partial delivery, and hence a partial surrender of the lien, under an entire contract.256

Undivided shares and passive ascertainment.

3.61  The second additional feature deriving from the 1995 changes concerns the relationship between the new sections 18, Rule 5(3), (4), and 20A. Although a buyer will not acquire an undivided interest under the latter provision until payment is made, once the bulk is exhausted by other buyers’ claims, leaving only the non-paying buyer with a claim to receive goods from that bulk, the property in the remaining goods will presumptively pass to that buyer under section 18, Rule 5(3), (4). The unpaid seller, however, may have the protection of a lien over the goods until payment is made.257 This provision thus illustrates the apparent anomaly that section 20A does not give a non-paying buyer an undivided share leaving the seller to be protected by that same lien. Section 18 Rule 5(3), (4), however, will apply only where the seller does not reserve the right of disposal under section 19, which an unpaid seller is likely to do in cases where section 18, Rule 5(3), (4), might come into play. In cases subject to both sections, the goods may be in the possession of a third party with the seller unable to exercise a lien.

Contrary intention.

3.62  A third additional feature of the 1995 changes is the reference in section 20A to the parties showing a contrary intention. It is clear enough that this intention can negative the creation of a buyer’s undivided interest, but less clear whether it can provide for an undivided interest in circumstances, for example, where the buyer has not paid, where the full requirements of the section have not been met. Section 20A(2) allows for a contrary intention only ‘[w]‌here this section applies’. The requirements of the section are that a bulk be identified and that the buyer have paid at least a part of the price. Whilst the parties would be free to allocate a full, undivided interest to a buyer who has made part-payment, they would not be free to make any provision for an undivided interest if the buyer has paid nothing. There seems no reason in principle why such a distinction ought to be drawn, but the language of the section appears to make the distinction unavoidable. As for section 55(1) of the Sale of Goods Act, this provision allows parties to negative or vary any rights, duties, and liabilities arising under the Act, which is a formula that does not lend itself to an expansion of the co-ownership rights created in section 20A(2). These rights diminish the effect of the ascertainment rule in section 16, a provision unsusceptible to contractual alteration under section 55(1). There is every reason, indeed, why the parties should not be free to dispense (p. 111) with the requirement of a bulk. It has been observed that ‘a priori common sense dictates that the buyer cannot acquire title until it is known to what goods the title relates’; the buyer is defeated ‘not by some arid legal technicality but by what Lord Blackburn called “the very nature of things”’.258 In sum, the contracting parties ought not to be able, therefore, to dispense with any of the conditions laid down in the amending legislation.

Undivided share and ‘goods’.

3.63  A fourth additional feature of the 1995 changes, as noted earlier,259 is that an undivided interest in goods is now defined as goods under the Sale of Goods Act 1979.260 This does not mean that a sub-buyer (who may not yet have paid) of unascertained goods in a bulk automatically becomes the buyer of an undivided share just because the buyer acquires an undivided share in the bulk upon payment. A distinction is to be drawn between a sub-buyer purchasing a quantity of goods from an identified bulk and a sub-buyer purchasing the buyer’s undivided share of that bulk. Only the latter sub-buyer may claim to be the purchaser of specific goods,261 able in an appropriate case to claim the general property in that share, unaffected by sections 16 and 20A. The distinction between the sale of an undivided share and the sale of unascertained goods in an identified bulk has not been eliminated by the amended Sale of Goods Act.

Unconditional Appropriation

Presumptive rule.

3.64  Once the embargo placed by section 16 on the passing of property is lifted, by the goods becoming ascertained,262 the way is open for the property to pass according to the intention of the parties.263 Failing an express or implied intention, the presumed intention of the parties264 in section 18, Rule 5(1), is as follows:

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 (p. 112) 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 then passes to the buyer; and the assent may be express or implied, and may be given either before or after the appropriation is made.

It is possible, where ascertainment from an agreed bulk is delayed, for an agreed unconditional appropriation to be held in suspense until the act of ascertainment occurs.265 This was confirmed by legislative changes adding a new Rule 5(3) and (4),which, since the bulk itself is already agreed to by the parties, does not require any further unconditional appropriation and concomitant assent.266 A review of the case law on Rule 5 fails to reveal a differential application of the rule depending upon the issue at stake, whether it is a matter of risk, or the seller’s bankruptcy, or the seller’s entitlement to sue for the price. Indeed, attempts by litigants to manipulate the rule according to context once attracted disparaging comment in the Privy Council.267 Yet it cannot be said that the approach to unconditional appropriation has been wholly consistent in the cases: as will be seen, much depends upon the particular character of the seller’s delivery obligations. The passing of property, as shown by Rule 5(1), is a consensual act. Indeed, it is shaped almost as a contract within the contract of sale, with one of the parties offering particular goods to another, who then accepts them.268

Appropriation.

3.65  Appropriation is an ambiguous word and the case law is unhelpful in elucidating it. Baron Parke once ascribed to it three meanings in a well-known but obscure passage.269 To isolate the meaning of the word, it helps for analytical purposes to define three stages in the passing of property in unascertained goods: first, an appropriation by one party; secondly, a further act by that same party that renders the appropriation unconditional; and thirdly, the assent of the non-appropriating party (whether to the appropriation or the making of it unconditional is not clear, but unlikely to be significant). Subject to one exception,270 appropriation simpliciter appears to mean only the ascertainment of the goods.271 A seller would thus appropriate from existing stock by setting aside goods intended for the fulfilment of a particular sale contract. Appropriation from future stock would be accomplished, for example, upon the later receipt of stock specially bought in for a particular resale commitment, or upon the completion by a manufacturing seller of a production run set up for a particular buyer, or upon a setting aside of goods out of a general consignment bought in or manufactured.

International sales.

3.66  In certain international sales conducted on c.i.f terms, appropriation works as follows. Goods are said to be appropriated to the contract when the seller passes (p. 113) on to the buyer details of their shipment, including the identity of the ship, in a notice of appropriation (or declaration of shipment). It is common for goods to be thus appropriated when they are an unascertained part of a larger bulk thereby identified by the notice, such as 10,000 tonnes of soya bean meal from the 50,000 tonnes on board the named ship. This process of appropriation, unlike the examples of appropriation given earlier, locks the seller in to delivering goods from that ship, but the goods can be any 10,000 tonnes therein.272 The property in the goods, even if ascertained from the bulk,273 will not usually pass by virtue of this appropriation,274 but the seller will have lost his contractual freedom to appropriate to the contract goods from any other source.

Unconditional.

3.67  The next step is to determine what it is about an appropriation that makes it unconditional.275 There are two broad alternative approaches. First, if an appropriation takes place when particular goods are applied to the contract, it is unconditional if the seller’s decision is, or later becomes, demonstrably a firm one. Secondly, an appropriation becomes unconditional when a seller puts it out of his physical power to reverse the effect of the appropriation. The former approach is based upon the idea of election,276 whereas the latter equates unconditional appropriation with delivery, which may accord with the particular case dealt with in Rule 5(2) but is absent altogether from Rule 5(1). The appropriation of a cargo by a c.i.f. seller, who thereby loses his contractual freedom to supply goods from an alternative source,277 would be unconditional if Rule 5 turned on election. The effect of the unconditional appropriation, however, might be inhibited by the non-ascertainment of the buyer’s quantity or by a reservation by the seller under section 19 of his right of disposal. Similarly, election may explain the Canadian case where the manufacturer of certain cars was bound to deliver them to a carrier and, before doing so, prepared drafts for the buyer with accompanying invoices and certificates identifying the cars by serial number. The buyers accepted the drafts and, though the cars were never delivered, the court held that they had been unconditionally appropriated to the contract.278 Consistent too with the election approach is Pignataro v Gilroy,279 where the seller sold a quantity of rice by sample, the sample having earlier been inspected by the buyer at the seller’s premises. A portion of the goods were to be removed by the buyer from the seller’s premises (p. 114) and the court stated that the necessary appropriation had occurred when the seller notified the buyer that the goods were ready for collection. This appropriation seems to have been understood as an unconditional appropriation. The outcome of the case turned upon whether the buyer had assented to the appropriation,280 which was found to have occurred some time after the seller’s notification but before the goods were stolen from the seller’s premises. In other cases, an appropriation281 effective to pass the property has been found when the seller filled containers supplied by the buyer, even though the goods were not delivered to the carrier.282 In these container cases, however, the goods were to be supplied from a specific bulk283 and the result is consistent with the c.i.f. example given previously. The Pignataro and container cases involve one or both of the following: a contractual commitment to deliver from a specific bulk and a statement to the buyer that the appropriation has been made.

Tentative or final selection.

3.68  Outside the cases just described, the election approach is open to the criticism that little separates a mere appropriation from one that is unconditional, and that it begs the question whether a setting aside by the seller is tentative or final. A further criticism is that it is difficult to police such an approach if there is no external display of the seller’s binding choice of goods. The result in other cases accords with the view that an appropriation becomes unconditional only when the seller puts it out of his physical power to change his mind.284 This may explain the view of Atkin J in Stein, Forbes & Co. v County Tailoring Co.285 that the appropriation of a seller who does not mean the buyer to have the goods before payment is only a conditional one.286 Further, in Carlos Federspiel & Co. SA v Charles Twigg & Co. Ltd,287 the seller, who had been paid by the buyer, was bound to ship a quantity of bicycles and tricycles at a UK port, and so had packed the goods into crates labelled with the buyer’s name and address. The seller was awaiting a ship bound for a Central American port when a receiver was sent in by one of the seller’s creditors. Consequently, delivery never took place. Pearson J held that the property had not passed288 and stated that unconditional appropriation289 occurs with the last act of the seller’s performance under the contract. The result in this case was difficult to avoid, given that section 18, Rule 5(2), presumptively has the property passing when the seller delivers the goods to a carrier.290 The (p. 115) performance of the seller’s last act is tantamount to delivery or constructive delivery.291 The constructive delivery that occurs where a third-party bailee attorns to the buyer, which puts a change of mind beyond the reach of the seller, on this basis marks the moment when the property passes.292 Constructive delivery should also be found where the seller holds the goods as bailee for the buyer. An attornment by the seller accommodates the cases described earlier of the buyer’s containers, where a constructive (more accurately a fictitious) delivery was found in the act of filling them.293 Indeed, the container cases were explained in Re Stapylton Fletcher Ltd294 as cases where the seller constituted himself a bailee of the contract goods. In Re Stapylton Fletcher Ltd, the court held that certain goods had been unconditionally appropriated to a sale contract when they were removed from the seller’s trading stock and then shortly afterwards mixed with similar goods destined for other buyers and held by the seller on warehouse terms.

Unconditional Appropriation and Sections 20A–B

Effect of undivided share on unconditional appropriation.

3.69  Although sections 20A–B are not couched in the language of unconditional appropriation, it must be asked what effect they might have on the existing understanding of unconditional appropriation in section 18, Rule 5.295 As stated earlier, a buyer, to the extent of any payment made, acquires an undivided co-ownership interest in ‘a bulk which has been identified either in the contract or by subsequent agreement between the parties’.296 The Act defines ‘bulk’ as a ‘mass or collection of goods of the same kind’, whose components are interchangeable and which is ‘confined in a defined space or area’.297 Suppose that in Carlos Federspiel & Co. SA v Charles Twigg & Co. Ltd298 there had been two prepaying Costa Rican buyers and they had both been informed by the sellers that their goods, bicycles of the same type, had been set aside and were awaiting shipment in the sellers’ loading bay. It is arguable that this would amount to the agreed identification of a bulk so as to confer a proprietary interest on each buyer.299 This conclusion, almost paradoxically, would be easier to reach if the crates were not addressed and were so positioned that the two parcels of goods were not physically separate. If in such a case only one buyer were informed of the readiness of the goods for dispatch, only that buyer, on the face of it, could claim that there is an identified bulk, the seller retaining a co-ownership interest in the remainder of the bulk.

Identification of bulk by subsequent agreement.

3.70  Suppose now that the sellers failed to inform either buyer that his goods were in the loading bay. This prompts the question what is meant by identification ‘either in the contract or by subsequent agreement’. Section 18, Rule 5(1), permits unconditional appropriation with an added assent to amount to a transfer (p. 116) of the property in the goods; as we shall see, that assent is frequently implied in advance of the appropriation. This is an implied agreement of sorts, but it might be difficult to see a similar passive response by the buyer to a seller’s message as the basis for a ‘subsequent agreement’ under section 20A. Nor could it easily be seen as an identification ‘in the contract’. Finally, if there is only one quantity of goods laid out in the loading bay for only one buyer, who is informed that the goods are ready for shipment, it is not easy to see that the goods constitute a ‘bulk’, but it seems perverse to deny such buyer a proprietary interest if, in the case outlined earlier, two buyers together had each an undivided interest. It would also be odd to deny an interest to the two buyers on the ground that their goods had been separated and identified to each contract so as not to form a commingled mass. The incoherence between the 1995 changes and the existing law on unconditional appropriation seems destined to cause future trouble. A relaxation of section 16 and its requirement of ascertainment, following upon the enactment of section 20A, does not sit easily with a continuing strict approach to section 18, Rule 5 based on the last act doctrine.

Scope of Rule 5(1)

Deliverable state and contractual compliance.

3.71  Rule 5(1) requires the goods to be in ‘a deliverable state’, which here has the same meaning as in Rule 1.300 Rule 5(1) was not satisfied where carpets, brought to the buyer’s premises, had not yet been fitted by the seller.301 It has been said that the goods must answer to the contractual description if the property is to pass under Rule 5,302 which is consistent with the express language of Rule 5(1) itself. The scope of description used to be larger for unascertained than for specific goods. In recent years, there has been a discernible tendency to diminish the scope of description so that, far from embracing all the stated attributes of unascertained goods, it is confined for specific and unascertained goods alike to the identity of the goods.303 Consequently, the property will not often nowadays be prevented from passing under Rule 5(1) by a failure to meet the contractual description. Where the buyer’s assent to an unconditional appropriation by the seller is implied, which is quite common,304 the justification for the above approach to description is that the buyer does not authorize the seller to appropriate to the contract goods not conforming to the basic standard of the contractual description. Given also the fundamental character of the seller’s title obligations under section 12(1), the buyer’s assent (p. 117) to an unconditional appropriation may be absent if the seller does not have adequate property rights to transfer to the buyer.305 In the case of goods that are non-conforming in matters of quality and fitness for purpose, so that the buyer has a right to reject them, yet the goods comply with the description requirement, the position is less clear. Although there is some support for the view that the property does not pass,306 there is greater support for the better view that the property passes defeasibly, so that upon rejection of the goods it revests in the seller.307 Matters of quantity are akin to matters of description. The property will not pass if the seller tenders goods other than the agreed contract quantity.308 If goods are delivered by instalments, in such a way that it is not known whether ultimately the wrong quantity will be delivered, then, assuming the right to reject the whole, the property in goods previously delivered may vest defeasibly in the buyer and revest in the seller upon rejection.309 Courts are also markedly reluctant to recognize that the property in goods the subject of an entire contract passes incrementally as they are delivered into the hands of a carrier,310 though express provision to this effect is commonplace in oil contracts,311 which suggests that a judicial revisiting of the position would be timely.

Assent

Nature of assent.

3.72  Rule 5(1) requires the assent of one party to the other’s unconditional appropriation.312 It may take the form of an authority given by the buyer to the seller to appropriate, as where the contract calls for payment against shipping documents,313 or it may be given by a third party, such as the carrier,314 acting thus as agent for the buyer. A seller delivering to a carrier other than the one nominated by the buyer will therefore not have the buyer’s assent to the unconditional appropriation.315 There is no need for a buyer’s assent to be referable to particular goods that the buyer can identify; it is enough that the buyer gives (p. 118) authority to the seller to make the selection.316 An assent induced by a misrepresentation has been said to be no assent at all,317which accords with the notion that the passing of property in goods initially unascertained turns upon the workings of a separate transfer contract within the contract of sale itself.318 A better approach, however, would be to regard such an assent as retractable. If it is the buyer’s assent that is thus induced, it will generally be to the advantage of the buyer to have a proprietary entitlement, especially since the passing of property is no bar to the exercise of contractual termination rights.319 If it is the seller’s assent that is induced, the circumstances may give the seller in some instances a right to rescind the contract itself.320 The assent to an unconditional appropriation is often implied: in Pignataro v Gilroy,321 a portion of the contract goods were in storage at a wharf. The buyer paid for the goods by cheque and requested a delivery order. One possible assent of the buyer was this request, preceding the seller’s unconditional appropriation that occurred when the seller notified the buyer that the goods were ready to be taken away. The court preferred, however, to find the buyer’s assent in doing nothing for a month after being notified by the seller that the goods were ready. This is evidently unsatisfactory, so far as it does not precisely date the moment when the property (and hence also the risk in this case) had passed to the buyer. A better approach would have been to find an implied assent after the passing of a reasonable time for the buyer to collect the goods. Even in those cases where it is implied, the assent is real enough:322 an unlawful repudiation of the contract by the buyer will effectively withdraw his assent to an unconditional appropriation by the seller.323 Denied the buyer’s cooperation in the passing of property, the seller is unable to sue for the price as a debt324 and must be content with a damages action for non-acceptance of the goods.325 The absence of an earlier assent by the buyer has prevented the property from passing, even though the goods have been marked in some way with the buyer’s name.326 Where the assent given is express and takes place after the seller has appropriated the goods, that act of appropriation is more likely to be treated as unconditional than a similar appropriation preceded by an implied assent.327

Assent and examination.

3.73  Assent needs to be considered in connection with the buyer’s right of examination of the goods,328 which has had an impact on both the passing of property and the buyer’s right to reject non-conforming goods. In the nineteenth century, it was common (p. 119) to assert that the buyer lost his right to reject by failing to examine the goods at or before delivery. If such an examination did take place, it could be regarded as providing the buyer’s assent to the seller’s unconditional appropriation of the goods.329 The relaxation of the buyer’s right of examination, so as to permit it and a concomitant rejection of the goods to take place upon their arrival, may explain why, until it became clear that the passing of the property was no bar to a later rejection of the goods,330 some courts held that the property did not pass before examination.331 Examination may therefore have encouraged courts generally to conclude that the property passed later rather than sooner in the case of unascertained goods.

Types of delivery.

3.74  The different delivery obligations of the seller have a bearing upon the moment property passes. We have seen that where the buyer is to take delivery of the goods from the seller’s premises, a number of cases hold that the property passes even before such delivery takes place. Where the seller undertakes personally to deliver the goods to the buyer’s establishment or residence, there appears to be no general rule, the property in some cases passing before delivery332 and in others upon delivery to the buyer at destination.333 The passing of property upon delivery is a likely construction where the sale is not on credit terms and the buyer is to pay upon receipt of the goods.

Rule 5(2) and Carriers

Independent carrier.

3.75  Where an independent carrier is employed by the parties,334 the position is dealt with by Rule 5(2) in these terms:

Where, in pursuance of the contract, the seller delivers the goods to the buyer or to a carrier or other bailee or custodier (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 to be taken to have unconditionally appropriated the goods to the contract.

Though its relationship to Rule 5(1) is not expressly stated, Rule 5(2) appears to be a particular application of the former rule. With its reference to the right of disposal,335 Rule 5(2) could fairly be read as meaning that the property passes no later than delivery to the carrier, leaving Rule 5(1) satisfied if, for example, the buyer has expressly assented to an appropriation before the goods are placed in the carrier’s hands. Nevertheless, the effect of enacting Rule 5(2) in specific terms is to make it hard to argue that the property passes before delivery in those cases where a carrier is engaged.336 It may pass, of course, after delivery if the seller (p. 120) still has duties to perform.337 In Canadian decisions dealing with a seller’s delivery duty expressed as f.o.b. the place of destination, the courts have decisively rejected the argument that the expression f.o.b. is designed only to indicate that the seller is to pay for the cost of carriage.338 Instead, they have held that the term indicates an intention to defer the passing of property.339 Rule 5(2) applies only to carriers and not to warehouses. Consequently, where goods are deposited by the seller in a warehouse, the property should not pass then but later, when the warehouse attorns to the buyer, and not later still when the buyer collects the goods from the warehouse.340

Reserving the Right of Disposal

General.

3.76  The purpose of section 19 is to counter the presumptive passing of property rules in section 18, which it does by stating that contracting for the sale of specific goods, or appropriating341 goods to a contract for unascertained goods, will not pass the property if the seller reserves the right of disposal. The draftsman might simply have left the matter to be determined by an application of the intention rule in section 17, which overrides the presumptive rules in section 18, but the additional text in section 19 has the merit of avoiding doubts about implied intention. The reservation of the right of disposal most often concerns unascertained goods and delays the passing of property after a delivery or constructive delivery, since delivery is normally the event upon which the property passes in such cases. But it can also affect specific goods where, in the case of property passing at the date of the contract, the reservation must take place by the terms of the contract and therefore before delivery.342 Where the contract is for unascertained goods, the seller may reserve the right of disposal unilaterally by taking the requisite action. If a seller reserves the right of disposal when he was bound, under the contract, to appropriate the goods unconditionally on delivering them to the carrier, the seller’s action will be no less effective as a reservation for that reason.343

(p. 121) International sales.

3.77  Reserving the right of disposal is commonly done in documentary international sales of unascertained goods taking place on f.o.b., c.i.f., or similar terms, the very case contemplated by the section.344 Despite delivery to the carrier, who is presumptively the agent of the buyer,345 the property will normally pass when shipping documents are subsequently tendered to the buyer in return for payment in full.346 A more prolonged form of security for payment is the conditional sale, whereby the property passes upon payment of the last instalment due under the contract. Unlike the functionally similar hire purchase and equipment leasing transactions, this transaction is governed by the Sale of Goods Act. In recent years, trade suppliers of goods have developed an appreciation of their rights under the Sale of Goods Act. The practice has grown of sellers expressly retaining the property in goods after delivery. In order to bridge the gap between the short commercial life of the contract goods and the eventual date of payment, sellers have also sought by a variety of drafting devices to acquire rights in goods made by the buyer with the aid of the contract goods, or in the proceeds of a sub-sale of these or the original contract goods.347

Reasons for reservation.

3.78  Where the seller reserves the right of disposal after delivering the goods to the carrier, the normal reason is that the seller is seeking security for the payment of the price,348 though there are other reasons. For example, a seller may wish to pledge the bill of lading issued by the carrier as security for a loan bridging the period between delivery and payment by the buyer,349 or may wish for tactical reasons to delay as long as possible the appropriation of the goods to contracts with different consignees.350

Reservation and bills of lading.

3.79  In international sales, reserving the right of disposal occurs most often in the presumptive case set out in section 19(2), namely where an order bill of lading351 naming the seller (or an agent, such as a bank) as consignee is issued by the carrier and retained by the seller.352 A seller taking a bill of lading in this form is free to indorse it (p. 122) at a later date in favour of the buyer, who will need it to take delivery of the goods from the carrier at the port of discharge. It is a question of fact whether a particular seller’s behaviour accords with this presumed intention.353 In The Albazero, Brandon J at first instance354 saw ample evidence to rebut any presumption that the sellers had reserved the right of disposal in order to secure payment by the buyers. The sellers, a major oil company, did not intend to pledge the bill of lading or tender it for cash payment from the buyer; the oil had been sold on credit; and sellers and buyers were associated companies. Nevertheless, because the stated destination in the bill of lading was ‘Gibraltar for orders’, whereas the contractual destination was Antwerp, Brandon J concluded, in view of the sellers’ manifest desire to keep for as long as possible their strategic freedom to divert the cargo to another customer at a different port of discharge, that the presumed intention in section 19(2) to reserve the right of disposal had not been rebutted.

Nature of the Seller’s Reservation

Reserving seller’s rights.

3.80  Section 19 does not say precisely what is the proprietary effect of reserving the right of disposal, and the lack of explicit connection between this section and the previous sections dealing with the passing of property is curious. If securing payment of the price were the only reason for this arrangement, it might plausibly be argued that the unpaid seller needs no more than a lien355 over the shipping documents after unconditionally appropriating the goods on delivery to the carrier. The bill of lading is the only effective way in which the goods can be constructively handled in transit356 and the carrier is both entitled and bound to deliver the goods only to the lawful holder of the bill of lading.357 Even if the property has passed to the buyer, an unpaid seller would be able to rescind the contract and resell the goods in the circumstances provided for by section 48358 and would be able to negotiate the bill of lading made out in his name to a second buyer. The problem with this reasoning is that, if a lien were all that the seller obtained, one would expect to see section 19 refer explicitly to lien and the section itself located in that part of the Act dealing with the real rights of the unpaid seller. Further, in the case of a seller who pledges shipping documents, a lien interest in the underlying goods would not be enough because a lien is not transferable359 and the pledgee would obtain no interest in the goods for the advance to the seller.360 Hence, it makes sense for such a seller to retain the general property when reserving the right of disposal. Moreover, a seller who has not appropriated the goods to a particular contract (p. 123) of sale when the bill of lading is issued cannot but be treated as having reserved the general property.361 Although the requirements of sections 16–18 for the passing of property have not been met, it should be noted that such a seller will often be factually or legally committed to tendering the shipping documents under a particular contract. For example, a seller with an unappropriated shipment in hand and an f.o.b. contract to perform may not be able to find another shipment for that contract within the time allowed by the contract for delivery, or may not be able to find another cargo on the same ship, which was nominated by the buyer and has now left port. In some circumstances, the act of shipping goods that accord with a particular contract may be seen as an election by the seller to appropriate the shipment to that contract.362 It should be otherwise if the seller has more than one contract to perform under which this shipment could have been made. In a c.i.f. string, a seller relaying a notice of appropriation becomes contractually committed to supply documents concerning goods on the named ship.

General property.

3.81  The cases recognizing that the seller has reserved the right of disposal usually treat the seller as having retained the general property in full,363 the implication being that the buyer has no proprietary interest. As will later be seen, the buyer in such cases commonly bears the risk from an earlier date and therefore has an insurable interest in the goods, which may be referred to ambiguously as though it were a property interest.364 In a minority of cases the buyer is recognized as having at least some interest in the goods by way of a derogation from any general property of the seller.365 One case refers to the seller as having (only) a ‘hold’ over the goods, going beyond the ‘right to retain possession’ and involving a power of resale on default by the buyer.366 A modern court is unlikely to hold that a seller reserves anything less than the general property.

Rebuttable presumption.

3.82  If, nevertheless, it were felt that in some cases the seller needs no more than a lien over the shipping documents then, instead of trying to diminish the proprietary effects of reserving the right of disposal, an alternative approach would be to deny that the seller has reserved the right of disposal at all. The rebuttable presumption in section 19(2) has been stated to be a weak one where payment is the only goal sought.367 It has been rebutted where the seller’s purpose in taking out an order bill of lading in his own name was because he feared the buyer would reject the goods and so wished to make certain he had an insurable interest in them.368 But the presumption was not rebutted in one case, where the seller procured from the master of the buyer’s own ship a bill of lading deliverable to order.369

(p. 124) Non-statutory Examples of Reservation

Additional cases of reservation.

3.83  Outside the express language of section 19(2), the right of disposal was held to have been reserved where the seller refused to comply with the contract by shipping goods on the buyer’s account, but instead procured the issuance of the bill of lading naming a fictitious person as consignee.370 A reservation has also been recognized where goods are stated in the bill of lading to be simply deliverable to order.371 Where the bill of lading is made out to buyer or order, the act of the seller in retaining possession of the bill of lading in this form is likely to be treated as a reservation,372 but not if the evidence shows the seller intended the buyer to have the general property.373 As a matter of principle, there is something to be said for the view that the seller thereby retains only a lien over the shipping documents since, while the contract remains on foot, the goods cannot be appropriated to any other contract of sale. Nevertheless, while still the holder of the bill of lading, the seller may indorse the bill so as to require the carrier to deliver to a different named consignee.374 There seems no reason, therefore, to distinguish different cases of reservation of the right of disposal according to the identity of the named consignee.

Bill of Lading and Bill of Exchange

Conditional passing of property.

3.84  Even if the bill of lading is delivered to the buyer, it does not follow that the seller thereby surrenders the right of disposal. Section 19(3) states that, where the seller transmits the bill of lading to the buyer together with a draft bill of exchange for the price, the buyer must return the bill of lading if he does not accept the draft.375 This refers to a practice not current in modern times. Section 19(3) makes no distinction between bills of lading naming the buyer as consignee and those naming the seller as consignee. It further provides that the property in the goods does not pass to the buyer who wrongfully retains the bill of lading. The difficulty with the language of section 19(3) is that it leaves open the possibility that the property may have been transferred to the buyer, only to be retransferred to the seller, possibly with retrospective effect, when the buyer wrongfully retains the bill of lading. The case law on which the provision is based is more precise in holding that the seller’s intention to pass the property to the buyer is conditional upon the buyer’s acceptance of the draft.376 In this regard, the proprietary consequences of a bill of lading being indorsed and delivered depend upon the intention of the transferor.377 The seller may intend not to pass the property to the buyer378 until the draft has been accepted, though (p. 125) there is a strong presumption that this was intended where the seller indorses and delivers a bill of lading to the buyer.379 Even if it were held under section 19(3) that no property interest passes to the buyer on the indorsement and delivery of a bill of lading, the buyer would be a buyer in possession of a document of title and thus empowered to transfer good title to a bona fide purchaser.380

Reservation of Title Clauses

Express clauses.

3.85  In domestic sales, it is common for unpaid sellers to reserve the right of disposal after delivery to the buyer by means of a Romalpa clause, which takes its name from the leading modern case that focused attention on the seller’s right of reservation.381 The practice developed because unpaid sellers, permitting the property to pass in the conventional way under section 18, find themselves at a disadvantage upon the insolvency of the buyer. The first call on the buyer’s assets will come from secured and preferential creditors, and the seller will join other unsecured creditors in receiving on average a very small insolvency dividend382 hardly worth the expense of lodging a proof with the buyer’s liquidator or trustee in bankruptcy.383 The great advantage to a seller of reserving the general property in the goods is that, until the property passes, no ownership rights vest in the buyer384 and therefore the goods cannot fall within a security granted by the buyer, before or after the contract of sale is concluded, to one or more creditors, or vest in the liquidator or trustee. A further advantage is that a property reservation clause need not be registered in the way that a security by way of charge or mortgage has to be if a secured creditor is to be able to assert his rights against third parties and the liquidator or trustee of the grantor of the security.385

Extended reservation.

3.86  An inherent limitation on the seller’s rights is that goods supplied tend to depreciate, or else they have an ephemeral existence, quite possibly acquired on a ‘just in time basis’, before being resold or consumed or transformed in identity by the buyer. To counter this limitation, sellers have drafted clauses purporting: (a) to reserve by an ‘all-moneys’ clause the general property in goods supplied until the whole of the buyer’s indebtedness to the seller, and not just the price owed for the goods supplied, has been paid off; (b) to reserve rights in goods newly manufactured by the buyer that incorporate the goods supplied by the seller; (c) to claim the proceeds of sale of goods resold by the buyer, whether these are (p. 126) the original goods or new goods manufactured by the buyer.386 In summary, sellers have been successful with adequately drafted clauses (including all-moneys clauses) to the extent of the original goods supplied, but have failed in their attempts to reserve property rights in money proceeds and newly manufactured goods. They have been unable to persuade courts that these extended rights are truly reserved rights as opposed to rights granted by the buyer, with the consequence that courts have characterized sellers’ efforts as charges. Since unpaid sellers invariably fail to register these extended rights as charges,387 they are worthless in the event of the buyer’s insolvency or receivership. This is understood, if not always stated in the cases: a seller unsuccessful in reserving the general property is plainly seen to have lost despite the empty compensation of having a charge over the assets of the buyer. A further complicating feature of Romalpa litigation, rendering it difficult to make universal statements, is that the scope of the seller’s rights may be affected by concessions made in the course of litigation and by the particular language used in the clause.

Simple reservation.

3.87  Where the contract goods remain in the buyer’s possession in an unaltered state, the courts have given effect to a simple reservation clause, even if the buyer is given liberty to resell, transform, or consume the goods before payment is made,388 and even if the buyer has authority from the seller to transfer an unencumbered title to sub-buyers.389 This accords with sections 17–19 of the Sale of Goods Act, which make it plain that the property in goods originally unascertained cannot pass to the buyer without the cooperation of the seller.390 Provided the seller’s intention is clear, it does not matter if other parts of a clause expressing this intention operate as a charge on the buyer’s assets.391 No particular words need be used by the seller, for example, describing the buyer as an agent, bailee,392 or fiduciary. If, however, the seller purports to reserve ‘equitable or beneficial ownership’, this has been held to be a charge.393 The technical reason is that the clause amounts to an outright transfer of the general property to the buyer, coupled with a grant back to the seller of the (p. 127) beneficial ownership in the goods. The premise given for this two-stage analysis, that the bare legal title cannot directly be conveyed to the buyer, is not as a matter of principle to be reconciled with the decision of the House of Lords in Abbey National Building Soc. v Cann,394 that the equitable interest of a mortgagee building society in a dwelling was carved out of the ownership of the dwelling before the proprietary residue395 vested directly in the buyer granting the mortgage. There was no scintilla temporis in which full legal and beneficial ownership vested in the buyer before the grant to the building society. Nevertheless, the pitfall presented by Re Bond Worth Ltd396 is easily avoided if the clause by one means or another makes it plain that the seller is reserving the general property in the goods.397

All-moneys Clauses

Effect of clause.

3.88  An all-moneys clause, by which the seller reserves the general property until all the buyer’s indebtedness to the seller is paid off, will be effective. The rules in the Sale of Goods Act making the passing of property a matter of contractual intention are not confined to payment of the contract price. This was confirmed by the House of Lords in Armour v Thyssen Edelstahlwerke AG.398 Where a seller supplies the buyer on a recurring basis, it means that past indebtedness can always be brought forward and attached to any goods of the seller in the buyer’s possession, even if part or the whole of the price for these goods has been paid. The use of all-moneys clauses also deprives of significance in proprietary terms the allocation of part-payments by the buyer to particular contracts of sale, since the part-payment of itself does not lift the reservation of title from any particular goods.399 The effectiveness of the all-moneys approach to reservation demands that the clause be inserted in all contracts for the supply of goods to the buyer since the seller cannot know in what order the buyer will consume those supplies. It was the view of the House of Lords in Armour that a seller availing himself of his reservation rights and repossessing the goods was under no obligation to account to the buyer for any surplus realized on resale exceeding the buyer’s indebtedness.400 This is certainly the case where the seller terminates the contract of sale for the buyer’s discharging breach,401 but it has been said that a seller will have to account for any surplus in the (unlikely) event of the contract remaining on foot at all times.402 A seller is most likely to realize a surplus where durable items have been supplied on various occasions under the terms (p. 128) of all-moneys clauses, or where part of the price of appreciating goods has been paid.403 Any attempt to make the seller account for a surplus comes close to treating him as a mortgagee realizing his security and to treating the reservation itself as a registrable charge.

Forfeiture relief.

3.89  The view of the seller’s entitlement to retain resale moneys, applicable to all moneys and simple reservation clauses, is entirely orthodox: the effect of the clause is that the seller reserves the full legal property until the attached condition has been met by the buyer. The buyer does not have a property interest in the goods, though there may, in rare circumstances, be relief from forfeiture of his possessory interest given to a buyer prepared to pay the sum due.404 To succeed, the buyer405 must show that the principal purpose of the reservation clause was to secure payment of the price by the buyer pursuant to the contract. This requirement should not pose a great problem in practice, but the buyer will usually be in severe difficulties in further showing a substantial windfall to the seller over and above the sum due under the contract.406

Altered Goods

Mixture, attachment, and alteration.

3.90  For the reservation clause to remain effective, the goods have to retain their identity. Where goods are supplied and commingled by the buyer with identical goods, the seller’s reservation of title should persist in the amended form of a co-tenancy interest in the commingled mass.407 The same result should follow even if the goods are commingled with goods of the same kind but of different quality.408 The original identity of goods will be lost, however, if they are irrevocably attached to a larger chattel or if they are so altered by the manufacturing process that they cannot be said to be the goods supplied by the seller. In the case of irrevocable attachment (or accessio), the rule is that ownership of the lesser thing vests in the owner of the greater thing. In Hendy Lennox (Industrial Engines) Ltd v Grahame Puttick Ltd,409 the incorporation of diesel engines identified by serial numbers in generator sets did not amount to accessio because the process could be reversed by several hours’ work without damaging the separated parts. Where goods are altered in the manufacturing process and lose their identity, it is a case of specificatio, and the operator, whose labour brings about the alteration, becomes the owner.410 It is a question of degree whether the goods have been sufficiently altered to lose their identity. Thus the identity of the goods supplied is lost where fibre is worked into yarn and subsequently into carpet,411 leather is cut and stitched into handbags,412 plastic pellets (p. 129) are used to make containers,413 and resin is incorporated in chipboard.414 Some generosity to the unpaid seller is to be found in other cases. Logs have been held to retain their identity despite being cut into planks.415 Zinc ingots have persisted even when incorporated in a molten mass of overall inferior quality, despite the significant difference in value between the original ingots and any recovery of the seller’s part from the molten mass.416 In another case, goods surrendered their original identity only when they lost all significant value as raw materials, the implication being that some degree of transformation by the buyer’s efforts was not fatal to that original identity.417

Tracing Claims

Right to trace.

3.91  Apart from attempts by sellers to draft clauses giving them rights in new goods manufactured by the buyer and in the money proceeds of sales of goods, tracing claims have been made by the unpaid seller to new goods and to money proceeds. In Aluminium Industrie Vaassen BV v Romalpa Aluminium Ltd,418 the seller of aluminium foil was held entitled to trace into the money proceeds from sales of the foil even though nothing was explicitly said in the contract about these proceeds. The court found between the buyer and the seller a fiduciary relationship, as required to trace in equity.419 Roskill LJ, in particular, saw nothing inconsistent in a buyer disposing of the foil to a sub-buyer as principal whilst acting as the seller’s agent or bailee.420

Bailees and tracing.

3.92  Romalpa is a flawed decision. The seller conceded that the buyer held the foil as a bailee,421 and it seems to have been assumed that bailees and agents receive proceeds as fiduciaries in all cases. It was stated in later cases that bailees only presumptively received proceeds as fiduciaries422 and, more recently, even the existence of a presumption has been doubted.423 In Borden (UK) Ltd v Scottish Timber Products Ltd,424 the court declined to trace the resin into the chipboard so as to give the seller a shared interest in the final product. The liberty given to the buyer to consume the resin in the manufacturing process was held to be inconsistent with a bailment relationship between the parties,425 so that no fiduciary relationship could exist between them. It was, moreover, impossible to regard the buyer as acting as agent for the seller.426 Had such a relationship existed, tracing might present an (p. 130) ‘intractable problem’ in a case where, for example, goods consisted of the seller’s resin and the buyer’s woodchip and labour. ‘[I]‌n quantifying the proportion of the value of the manufactured product which the tracer could claim as properly attributable to his ingredient’, it might be impossible to do this for the fluctuating values over time of the various ingredients in manufactured goods.427 The case was far removed from that of an homogeneous mixture, as where a sovereign is added to a bag containing already one thousand sovereigns and a successful tracing claim to one thousand sovereigns would yield a charge over the thousand and one sovereigns for that amount.428

Modern tracing developments.

3.93  The common law rules for following assets would not have availed the seller in Borden since the common law will not follow assets into a mixed fund.429 Nevertheless, possible developments in the law of tracing should be borne in mind. Lord Millett has powerfully argued that ‘there is nothing legal or equitable about the tracing process. There is thus no sense in retaining different rules for tracing at law and in equity. One set of tracing rules is enough.’430 If this logic were to be adopted as English law, it would dispense with any need for a fiduciary relationship to enforce a tracing claim. Surrendering to the new orthodoxy that tracing is merely the process for asserting a pre-existing claim431 might turn out to have incalculable consequences in commercial matters unless tracing were limited to cases where the original goods have been erased or alienated by a wrongful act.

Extended Title Reservation

Recharacterizing extended reservation clauses.

3.94  A reservation of title clause may go beyond the rights of the seller to the original goods and extend to the money proceeds of those goods, to new goods, or to the money proceeds of new goods. The cases demonstrate that it is a matter of ‘looking to the substance and reality of the transaction’432 to determine whether the label chosen by the parties is appropriate. More recent case law on the distinction between fixed and floating charges has made it plain that the parties may be free contractually to define their rights and duties but it is for the courts to characterize the nature of the agreement or interest that they have created.433 There is every reason to adopt the same approach to the characterization of extended reservation of title clauses so far as they seek to confer rights on the seller to new goods and money proceeds. If in fact the buyer is given liberty to deal with the goods supplied in the ordinary course of business, then credence will not be given to the language of agency or fiduciary relationship adopted in the contract of sale. As expressed by Mummery J in Compaq Computer Ltd v Abercorn Group Ltd:434 ‘When [the buyer] sold [the seller’s goods] which it had not paid for to subpurchasers it did not sell as bailee, agent, fiduciary or trustee. It did not sell in breach of any fiduciary obligation. [The buyer] sold [the seller’s goods] lawfully on its own account, vesting full legal and beneficial (p. 131) title in [the seller’s goods] in its subpurchasers. It sold [the seller’s goods] without reference to [the seller], when it liked, at what prices it liked and on what terms it liked, in the hope of making a profit for itself.’

Creation of new goods.

3.95  It was stated earlier that a seller, relying upon a simple reservation clause, may not trace the goods once they lose their identity in the manufacturing process. But what is the effect of a clause that purports to reserve in the seller the general property in those newly manufactured goods? Robert Goff LJ in Clough Mill Ltd v Martin435 gave considerable comfort to the draftsmen of such extended clauses. That case involved various consignments of yarn that had not lost their identity, but the reservation clause stated that the ownership of the yarn ‘shall be and remain with’ the seller even if the yarn were ‘incorporated in or used as material for other goods’. Robert Goff LJ had difficulty seeing why such a clause, vesting the property in new goods in the seller from the moment of their creation, amounted to the conferment by the buyer of a right on the seller by way of charge, even though, but for the clause, the rules of property law would have vested ownership of the new goods in the buyer. With respect, this reasoning is hard to support. It is the essence of a successful reservation clause that its effects require no proprietary input from the buyer: the seller declines to participate in the process of an assented to unconditional appropriation that would pass the property to the buyer under section 18, Rule 5. The clause referred to by Robert Goff LJ requires the buyer to surrender property rights to the new goods conferred by the rules of accessio and specificatio.436 Furthermore, a different view of the matter was taken by Buckley LJ in Borden (UK) Ltd v Scottish Timber Products Ltd,437 who thought it ‘impossible’ for the seller to reserve the property in a new item that ‘originates’ with the buyer. In this area of law, results speak louder than words. Robert Goff LJ himself went on to say that the above clause was in fact a charge. It gave no credit for any value added by the buyer in the form of labour and materials, and the learned judge could not believe the parties intended the seller would have the windfall benefit that would accrue under a reservation clause in a contract terminated for the buyer’s discharging breach.438 The prospect of two suppliers of raw materials, each relying upon a clause like that in Clough Mill, also pointed to its treatment as a charge, despite the ‘violence’ this did to the language used.439 It has even been asserted that, if the rights of the seller are to be found in the very language of a reservation of title clause, then the source of the seller’s rights is the clause and not the equitable principles that might have been applied in the absence of the clause.440 This conclusion would have the clause characterized as giving rise to a registrable charge. Finally, a New Zealand court was driven to conclude that an all-moneys vesting clause had to be construed as a floating charge because, if the buyer continued to purchase on credit, the seller would never be in receipt of the full amount owed (p. 132) and the buyer would never receive title to the goods it manufactured. This could hardly have represented the true intention of the parties.441

Money proceeds.

3.96  The remaining area of difficulty concerns the money proceeds of sub-sales of the goods442 by the buyer. In Aluminium Industrie Vaassen BV v Romalpa Aluminium Ltd,443 a quantity of aluminium foil was supplied under a contract containing a clause providing that ‘ownership...will only be transferred to purchaser when he has met all that is owing’ to the seller. The clause also stated that the buyer was ‘fiduciary owner’ of new goods made with the foil and had to ‘hand over...claims’ against sub-buyers to the seller. This clause was not apt to cover the money proceeds of the original foil, which was the subject of a tracing claim instead.444 Later cases, dealing with express proceeds clauses extending to the proceeds of new goods, have set down conditions to be satisfied if these clauses are not to be treated as registrable charges. These constraints, in practical terms impossible to satisfy,445 drive home the message that it is not for the parties to deem their relationship to be a fiduciary one or one of agency if in objective commercial terms they are conducting an arm’s-length sale.446

Requirements for successful proceeds clauses.

3.97  The conditions required for a successful proceeds clause are as follows. First, the seller must require the proceeds to be kept segregated from other assets of the buyer.447 Secondly, to the extent the seller’s interest in the proceeds is defeasible upon payment of the contract price, that interest will be regarded as a charge.448 Thirdly, any requirement that the buyer shall account only for such proceeds as equal the price due under the sale contract will be regarded as inconsistent with the beneficial interest in the proceeds vesting first in the seller.449 Fourthly, language in the sale contract requiring the buyer to transfer or pass on claims against sub-buyers is not consistent with the seller’s claim that those rights were vested in him from the date of their creation.450 Fifthly, a fixed period of credit that does not match the cycle in which the buyer receives the proceeds of (p. 133) a resale will tend towards the conclusion that a proceeds clause amounts to a charge.451 The obstacles facing the seller seeking a non-registrable interest in money proceeds seem insuperable.

Insolvency and Title Reservation

Receivership.

3.98  The rights of a seller reserving title to the goods supplied are subject to controls laid down in the Insolvency Act 1986, primarily in Schedule B1 to the Act.452 The office of administrator was created in the Insolvency Act 1986, primarily to deal with cases where no dominant secured creditor existed with a floating charge453 over the whole or substantially the whole of a debtor company’s assets. It was the practice for secured creditors of this type to reserve the power to appoint, in the name of the debtor company, a receiver and manager with a mandate to pay the secured creditor and to exercise extensive powers of management as might be needed for the particular case. Receivers and managers appointed in this way were designated administrative receivers in the Insolvency Act, which conferred on them special statutory powers to accomplish their task.454 The Act also set out in a schedule a list of powers to deal with the company’s property and affairs comparable to the powers that would in any case have been conferred on the administrative receiver by well-drawn security documents.455 Administrative receivers, however, were not granted the power to interfere with reservation of title rights.456 This power, however, was granted to administrators.457

Administration.

3.99  Under the Insolvency Act 1986, an administrator might be appointed by the court to achieve one or more stated goals, the principal ones for present purposes being the survival of the company as a going concern and the achievement of a greater break-up value of the company than would be possible in a liquidation. The exercise of management powers and the continuing use of assets subject to reservation of title rights were seen as necessary if the administrator was to achieve those goals. When the Insolvency Act was amended in 2002, the administrator was given the following goals: ‘(a) rescuing the company as a going concern, or (b) achieving a better result for the company’s creditors as a whole than would be likely if the company were wound up (without first being in administration), or (c) realising property in order to make a distribution to one or more secured or preferential creditors’.458 Furthermore, apart from special cases, including existing debentures allowing for the appointment of administrative receivers, no new appointments of administrative receivers could be made.459 Nevertheless, administrators, formerly only appointed in court, could now be the subject of an out-of-court appointment. The administrator was subjected to a duty to weigh the interests of all creditors of the company in administration, but it does not seem that the modified procedure has had a major impact on outcomes for secured creditors. More importantly, for present purposes, the replacement of administrative receivers (p. 134) by administrators has meant that creditors with security over substantially the whole of a debtor company’s assets (a qualifying charge that must be or include a floating charge) can appoint an out-of-court administrator with the added power to prevent the enforcement of reservation of title rights. Creditors with a qualifying charge may choose instead to agree to or encourage the out-of-court appointment of an administrator by the debtor company or its directors.

Moratorium.

3.100  The Insolvency Act creates a moratorium on the enforcement of reservation of title rights while the company is in administration: ‘[n]‌o step may be taken to repossess goods in the company’s possession under a hire-purchase agreement’ except with the consent of the administrator or the permission of the court.460 A ‘hire-purchase agreement’ is broadly defined to include a reservation of title agreement.461 In cases where an application is made to the court for the appointment of an administrator, there is further provision for an interim moratorium pending the appointment of the administrator.462 Once appointed, the administrator has the power to dispose of ‘hire-purchase’ property as if the rights of the reserver of title were vested in the debtor company.463 The net proceeds of the disposal, however, must be applied to the payment of the debt owed to the ‘hire-purchase’ creditor, along with, where relevant, any further sum needed to arrive at the figure of a market value disposal of the property.

Footnotes:

1  S. 49(1).

2  S. 20.

3  Misrepresentation Act, s. 4(1); see Ch. 10, paras 10.107 et seq.

4  The claimant must show possession or the right to immediate possession at the time of the tort. The incidence of property will also come into play in the adjustment of complex liabilities: Torts (Interference with Goods) Act 1977, ss. 7–9.

5  e.g., Edwards v Ddin [1976] 1 WLR 942.

6  Re Wait [1927] 1 Ch. 606; Carlos Federspiel & Co SA v Charles Twigg & Co. Ltd [1957] 1 Lloyd’s Rep 240.

7  As the full title of his treatise, usually known as Blackburn on Sale, shows: A Treatise on the Effect of the Contract of Sale on the Legal Rights of Property and Possession in Goods, Wares and Merchandise (1845).

8  ‘Through Title to Contract and a Bit Beyond’ (1938) 15 NYU LR 159.

9  Cochrane v Moore (1890) 25 QBD 57. The rule in Scots law, to which the provisions of ss. 17 and 18 of the Sale of Goods Act are an exception, is that delivery is required: Burnett’s Trustee v Grainger [2004] UKHL 8 at [12]. For non-sale contracts, the critical question is whether parties may, in the same way as is permitted under the Sale of Goods Act, provide for the passing of property in future goods in the absence of delivery or deed as soon as those goods come into existence. The better view is that it may so provide: Akron Tyre Co. Pty Ltd v Kittson (1951) 82 CLR 477 (Williams and Kitto JJ), relying upon Reeves v Barlow (1884) 12 QBD 436. Otherwise, it should not be assumed that passing of property rules in the Act are on their terms applicable to sale of goods contracts: see Wincanton Group Ltd v Garbe Logistics UK 1 SARL [2011] EWHC 905 (Ch) at [41]. Shipbuilding contracts have long been treated as sale of goods contracts and subject to the Act: see para. 3.29, and the shipbuilding authorities have been applied in turn to a contract for the construction of a mobile camp: Eastern Well Service No. 2 Pty Ltd v Campac (Aust) Pty Ltd [2010] QSC 350.

10  S. 16 (unascertained goods); s. 5(3) (sale of future goods treated as agreement to sell).

11  Lunn v Thornton (1845) 1 CB 379. There is an exception for goods with a potential existence: Grantham v Hawley (1615) Hob. 132, discussed in Ch. 2, para. 2.43.

12  S. 1(3) of the 1995 Act, adding a new s. 20A to the Sale of Goods Act with effect from 19 Sept. 1995.

13  Para. 3.57.

14  S. 17(2). See Saks v Tilley (1915) 32 TLR 148; Re Anchor Line (Henderson Bros) Ltd [1937] Ch. 1; R.V. Ward Ltd v Bignall [1967] 1 QB 532. ‘It is impossible to imagine a clause more vague than this, but I think it correctly represents the state of the authorities when the Act was passed’: Varley v Whipp [1900] 1 QB 513, 517 (Channell J).

15  These presumptions are not difficult to rebut: Kulkarni v Motor Credit (Davenham) Ltd [2010] EWCA Civ 69 at [29]; [2010] 2 All ER (Comm) 1017 (Rix LJ). Although not difficult to rebut, they should be in the mind of the judge going on to consider whether the circumstances listed in s. 18 rebut the presumption (but see the odd inversion of presumptive rule and circumstances in Tanks and Vessels Industries Ltd v Devon Cider Co. Ltd [2009] EWHC 1630 (Ch) at [50], which in effect denies the very existence of a presumptive rule).

16  Discussed at para. 3.06.

17  James v The Commonwealth (1939) 62 CLR 339.

18  Ontario Law Reform Commission, Report on Sale of Goods (1979), ii, 342–4.

19  Koppel v Koppel [1966] 1 WLR 802 (barter). Cf. Flynn v Mackin & Mahon [1974] IR 101.

20  The meaning of ‘deliverable state’ is discussed under Rule 2: para. 3.11.

21  Tarling v Baxter (1827) 6 B & C 360; Simmons v Swift (1826) 5 B & C 857; Martindale v Smith (1841) 1 QB 389; Gilmour v Supple (1858) 11 Moo. PC 551; Sweeting v Turner (1871) LR 7 QB 310, 313; Koppel v Koppel [1966] 1 WLR 802, 811. The place where the property passes is where the goods happen to be at the contract date: Badische Anilin und Soda Fabrik v Hickson [1906] AC 419.

22  On the search for intention, see Re Anchor Line (Henderson Bros.) Ltd [1937] Ch. 1.

23  They were encouraged to do so by the old s. 11(1)(c) of the 1893 Act which, before its amendment by s. 4(1) of the Misrepresentation Act 1967, in concert with s. 18, Rule 1 deprived the buyer of specific goods of the right of rejection for breach of condition where the property passed at the contract date.

24  Dixon v Yates (1833) 5 B & Ad. 313, 340: ‘The very appropriation of the chattel is equivalent to delivery by the vendor, and the assent of the vendee to take the specific chattel, and to pay the price, is equivalent to his accepting possession’ (Parke B).

25  Tarling v Baxter (1827) 6 B & C 360 (‘where there is an immediate sale and nothing remains to be done by the vendor as between him and the vendee’ (Bayley J)).

26  S. 29(2).

27  S. 39(1)(a); see Ch. 11, paras 11.08 et seq.

28  Tarling v Baxter (1827) 6 B & C 360.

29  Craig v Beardmore (1904) 7 OLR 674 (Can.).

30  Dennant v Skinner [1948] 2 KB 164. Cf. Dobson v General Accident Fire and Life Assurance Corpn plc [1990] 1 QB 274, where the court avoided passing of property issues in holding that a loss could be claimed under a theft clause in an insurance policy where goods were delivered in return for a stolen, and therefore valueless, building society cheque.

31  Richardson v Gray (1869) 29 UCQB 360 (Can.).

32  [1937] Ch. 1.

33  R.V. Ward Ltd v Bignall [1967] 1 QB 534, 545 (Diplock LJ).

34  See also Minister for Supply and Development v Servicemen’s Co-operative Joinery Manufacturers Ltd (1952) 82 CLR 621, 635, 640; Orix Australia Corp. Ltd v Peter Donnelly Automotive Pty Ltd [2007] NSWSC 977 (stipulation for payment on delivery of specific goods treated as reservation of title clause); Michael Gerson (Leasing) Ltd v Wilkinson [2001] QB 514 at [49] (‘inconceivable’ that a finance company would pass the property to an outright purchaser before payment) and [57]; Habton Farms v Nimmo [2003] EWCA Civ 68; [2004] QB 1 at [118].

35  See para. 3.06.

36  See, e.g., Hunt v Silk (1804) 5 East 449; Street v Blay (1831) 2 B & Ad. 456.

37  Weston v Downes (1778) 1 Dougl 23; Towers v Barrett (1786) 1 TR 133. The common law process of rescission was not flexible enough to allow for a minor monetary adjustment. Cf. the American position: S. Williston (1901) 14 Harv LR 317, 421, and American Law Institute, Restatement of the Law of Contracts (1939), §349, as reformulated in broader discretionary language in Restatement of the Law Second [:]‌ Contracts (1982), §384(2)(b).

38  Street v Blay (1831) 2 B & Ad. 456.

39  Subject to a contrary term in the contract: see Head v Tattersall (1872) LR 7 Ex. 7; Rowland v Divall [1923] 2 KB 500 (Atkin LJ).

40  One view was that the appropriation of non-conforming ascertained goods did not pass the property: Ollett v Jordan [1918] 2 KB 41. Note that, for unascertained goods, the presumptive rule (Rule 5) turns on the appropriation of goods that conform to the contract description. See further para. 3.68. Delaying the passing of property seems to have been due in some cases to a desire to preserve the buyer’s right of examination (see Ch. 10, paras 10.47 et seq) notwithstanding the prior delivery of the goods to the carrier as the buyer’s agent. This view can be seen also in Atkin LJ’s opinion that the property in c.i.f. goods does not pass upon the documentary transfer if the buyer has not had the opportunity to examine: Hardy v Hillerns & Fowler [1923] 2 KB 490, 499; see also M. G. Bridge (1986) 20 UBC LR 53, 100, n. 23.

41  e.g. the modern orthodoxy of prospective contractual termination: Heyman v Darwins Ltd [1942] AC 356; Photo Production Ltd v Securicor Transport Ltd [1980] AC 827; Johnson v Agnew [1980] AC 367.

42  [1900] 1 QB 513.

43  [1900] 1 QB 513, 517.

44  See Taylor v Combined Buyers Ltd [1924] NZLR 627; Armaghdown Motors Ltd v Gray [1963] NZLR 518.

45  Varley v Whipp [1900] 1 QB 513.

46  Cf. Vigers Bros v Sanderson Bros [1901] 1 QB 608, 612, where the court restricted a clause providing for the passing of property to ‘goods which come within the meaning of the contract’.

47  See Ch. 7, paras 7.04 et seq.

48  It does not relate to conditions that have no bearing on the passing of property: Classic Automobiles of London v L Aura Holdings Inc. [1997] EWCA Civ 2724.

49  Cf. Head v Tattersall (1872) LR 7 Ex. 7.

50  See Godts v Rose (1855) 17 CB 229; Shepherd v Harrison (1871) LR 5 HL 116; Kidd v Harden [1924] 3 WWR 293 (Can.).

51  See McEntire v Crossley Bros Ltd [1895] AC 457.

52  This requirement also appears in Rule 5(1), discussed at paras 3.60 et seq.

53  P. S. Atiyah (1956) 19 MLR 315.

54  If the goods are not in a deliverable state, does it mean that the buyer may reject a tender of them, even if the seller has not committed a breach of condition, and call upon the seller first to put them in a deliverable state? If so, the unfulfilled requirement under the contract that the seller put the goods into a deliverable state would supply a defence to a seller’s claim for damages for non-acceptance. For the connection between rejecting a tender of goods and termination, and between rejection and cure, see Ch. 10, paras 10.127 et seq.

55  Kulkarni v Motor Credit (Davenham) Ltd [2010] EWCA Civ 69 at [27]; [2010] 2 All ER (Comm) 1017 (Rix LJ).

56  If such activities are to be performed by the buyer, as in Kursell v Timber Operators and Contractors Ltd [1927] 1 KB 298, the case will come under the general language of s. 18, Rule 1.

57  [1922] 1 KB 343.

58  [1922] 1 KB 343, 345 (Bankes LJ): ‘A “deliverable state” does not depend upon the mere completeness of the subject matter in all its parts. It depends on the actual state of the goods at the date of the contract and the state in which they are to be delivered by the terms of the contract.’ See also Wilde v Fedirko [1920] 1 WWR 866 (Can.); McDill v Hilson [1920] 2 WWR 877 (Can.) (seller agreed to polish furniture already paid for by buyer). It would be interesting to see if a court would so readily apply s. 18, Rule 2, where the risk of damage to the goods is not the issue but rather the insolvency of the seller.

59  Rugg v Minett (1809) 11 East 210.

60  Notice was introduced into the original Sale of Goods Bill on a Scottish suggestion that it would be unfair to put the risk on a buyer who did not know that the property had passed.

61  Jerome v Clements Car Sales Ltd [1958] OR 738 (Can.).

62  (1866) LR 2 CP 127.

63  The court was generous: the goods had not been ascertained from bulk (see K. Llewellyn (1938) 15 NYU LR 159, 172, n. 20). Estoppel would not assist the buyer in view of the seller’s insolvency.

64  See Broadcrest CD Ltd v Ruddock 2000 WL 1881420.

65  Like the rest of the rule, notice can be dispensed with by contrary intention: Martineau v Kitching (1872) LR 7 QB 436, 449; Begert v Parry (1922) 70 DLR 233.

66  Blackburn on Sale (2nd edn, by J.C. Graham, Stevens, 1885), 175.

67  (1809) 11 East 210.

68  Simmons v Swift (1826) 5 B & C 857. See also Logan v Le Mesurier (1847) 6 Moo. PC 116; Gilmour v Supple (1858) 11 Moo. PC 551; Acraman v Morrice (1849) 8 CB 449: R v Tideswell [1905] 2 KB 273, 277 (no larceny where goods are counted and then a false number returned by the buyer in collusion with the seller’s agent).

69  Rugg v Minett, (1809) 11 East 210.

70  Tansley v Turner (1835) 2 Bing. NC 151.

71  Hansen v Meyer (1805) 6 East 614, 627; Alexander v Gardner (1835) 1 Bing. (NC) 671; Lockhart v Pannell (1873) 22 UCCP 597 (Can.).

72  Turley v Bates (1863) 2 H & C 200; Nanka-Bruce v Commonwealth Trust [1926] AC 77.

73  Poole v Smith’s Car Sales (Balham) Ltd [1962] 1 WLR 744, 747–8.

74  For the requirement that the goods be returned, see Kirkham v Attenborough [1897] 1 QB 201, 203; Poole v Smith’s Car Sales (Balham) Ltd [1962] 1 WLR 744.

75  Note: the language of seller and buyer will be used in this discussion of Rule 4 even where the arrangement under which the goods are delivered has not yet become a contract of sale.

76  Atari Corp (UK) Ltd v Electronic Boutiques Stores (UK) Ltd [1998] QB 539.

77  [1998] QB 539.

78  See also Kirkham v Attenborough [1897] 1 QB 201, 204 (Lord Esher MR).

79  [1998] QB 539, 551 (Auld LJ). This view needs some adaptation for the case where severable quantities of a single consignment of goods are accepted at varying intervals.

80  [1998] QB 539, 548 ( Phillips LJ).

81  [1998] QB 539.

82  Elphick v Barnes (1880) 5 CPD 321 is a case of this kind. Quaere the binding character of the contract where the buyer’s right of rejection appears to be unfettered as it was in Elphick? In French law, such potestative (or self-enabling) clauses in contracts are null and void: C. civ. Arts. 1170, 1174.

83  Felthouse v Bindley (1862) 11 CBNS 869, affd (1863) 7 LT 835. But see Atari Corp (UK) Ltd v Electronic Boutique Stores (UK) Ltd [1998] QB 539, which treats the formation of the contract of sale as succeeding a previously binding contract of bailment. There is an argument that the rules of contract formation ought not to be applied so strictly where the issue is whether a bailment contract has been transformed into a contract of sale.

84  Cf. May and Butcher Ltd v The King [1934] 2 KB 17 note (HL), for the view that the reasonable price rule in s. 8(1) cannot be invoked until an agreement passes the threshold test of a binding contract at common law. The rules of the common law continue to apply to contracts of sale of goods if they are not inconsistent with the provisions of the Act; s. 62(2).

85  Cf. Holwell Securities Ltd v Hughes [1974] 1 WLR 155.

86  On the sending of unsolicited goods, see Ch. 1, paras 1.26 et seq.

87  Acceptance should not have the special meaning given to it for the purposes of s. 35.

88  [1897] 1 QB 201, followed in London Jewellers Ltd v Attenborough [1934] 2 KB 206.

89  Whitehorn Bros v Davison [1911] 1 KB 463.

90  Kirkham v Attenborough [1897] 1 QB 201, 203 (Esher MR); see also Kirkham at 204 (Lopes LJ), and the bailee’s ‘free control [over the goods] so as to be in a position to return them’.

91  Donald v Suckling (1866) LR 1 QB 585.

92  Cf. Re Florence (1879) 10 Ch. D 591, 593 (sale or return bailee does not sell the goods as owner but as the holder of an option).

93  (1912) 107 LT 434.

94  Genn v Winkel (1912) 107 LT 434, (Buckley LJ).

95  Consider the conduct of the bailee’s salesmen in Poole v Smith’s Car Sales (Balham) Ltd [1962] 1 WLR 744 using the car for their own purposes.

96  Like conversion but without the restricting effect of s. 11(3) of the Torts (Interference with Goods) Act 1977 (denial of title alone is not a conversion); see Astley Industrial Trust v Miller [1968] 2 All ER 36— registering the car.

97  [1962] 1 WLR 744; see also Moss v Sweet (1851) 16 QB 493.

98  Re Ferrier [1944] Ch. 295.

99  e.g., by retaining destroyed goods or goods that have had to be repaired beyond a reasonable time.

100  Houghland v R.R. Low (Luxury Coaches) Ltd [1962] 1 QB 694; Mitchell v Ealing LBC [1979] QB 1; Port Swettenham Authority v T.W. Wu & Co. (M) Sdn Bhd [1979] AC 580.

101  Genn v Winkel (1912) 107 LT 434 (Vaughan Williams LJ).

102  (1879) 4 Ex. D 279.

103  [1998] QB 539.

104  Although s. 35 is not mentioned in the case, there are similarities between rejection under that section and rejection of the offer under s.18, Rule 4 (see [1998] QB 539, 551 (Auld LJ)).

105  The bailor did not claim that the goods had to be physically returned to it ([1998] QB 539, 544 (Waller LJ), 549 (Phillips LJ), the latter citing Ornstein v Alexandra Furnishing Co. (1895) 12 TLR 128)) and the sale or return agreement evidenced in fax messages imposed no such requirement. An analogy with s. 36 would therefore make the bailee’s notice effective if it made the goods available for collection by the bailor.

106  A bailee failing to hand over the goods at that time would commit the tort of conversion according to Waller LJ: [1998] QB 539, 546. It is submitted, however, that delay by the bailee should be treated no more strictly in this type of bailment than in other types.

107  [1906] 2 KB 574.

108  Weiner v Harris [1910] 1 KB 285, discussed in Ch. 5, paras 5.88 et seq. For the difference between sale or return and agency, see Re Nevill (1870) LR 6 Ch. App. 397. See also WT Lamb & Sons v Goring Brick Co. Ltd [1932] 1 KB 710, The Kronprinzessin Cecilie (1917) 33 TLR 292, Ch. 2, para. 2.82, and the cases on reservation of title, discussed at paras 3.81 et seq.

109  Percy Edwards Ltd v Vaughan (1910) 26 TLR 545; see also Whitehorn Bros v Davison [1911] 1 KB 463, 483–4.

110  Swenson v Lavigne [1925] 3 DLR 681; see also Ellis v Mortimer (1805) 1 B & P NR 257.

111  Ss. 5(3) and 16.

112  Discussed at paras 3.51 et seq. The Act does not in fact explicitly use the language of tenancy in common.

113  S. 5(1).

114  Orr v Danforth Wine Co. [1936] OWN 306 (Can.).

115  Clarke v Spence (1836) 4 A & E 448; Seath v Moore (1886) 11 App. Cas. 350; Reid v MacBeth & Gray [1904] AC 223; Sir James Laing & Sons Ltd v Barclay, Curle & Co. Ltd [1908] AC 35; Re Blyth Shipbuilding & Dry Docks Co. Ltd [1926] Ch. 494; Eastern Well Service No. 2 Pty Ltd v Campac (Aust) Pty Ltd [2010] QSC 350. In the absence of such a clause, there appears to be ‘a strong prima facie presumption’ against the passing of property in incomplete work: Seath v Moore, at 370 (Lord Blackburn); Sir James Laing & Sons. See also Re Royal Bank of Canada and Saskatchewan Telecommunications (1985) 20 DLR (4th) 415.

116  Seath v Moore (1886) 11 App. Cas. 350, and Re Blyth Shipbuilding [1926] Ch. 494 (where this seems to be treated as a rule of law).

117  But it may be possible to provide for the property to pass in unattached parts by clear drafting: North Western Shipping & Towage Co. v Commonwealth Bank of Australia Ltd (1993) 118 ALR 453, 481 (Fed. CA). See also Eastern Well Service No. 2 Pty Ltd v Campac (Aust) Pty Ltd [2010] QSC 350 at [32] (‘a contract for the sale from time to time of a ship in its various stages of construction’).

118  Anglo-Egyptian Navigation Co. v Rennie (1875) LR 10 CP 271; Petromec Inc. v Petrolas Brasileiro SA Petrobas [2004] EWHC 1180 (Comm); [2005] 1 Lloyd’s Rep 219 at [36], affirmed without reference to this point at [2005] EWCA Civ 891; [2006] 1 Lloyd’s Rep 121. Both cases concerned contracts for work and materials but the principle should be the same. It was also held in the latter case that the property in equipment brought on board the ship had passed even though the equipment had not yet been irrevocably incorporated in the structure of the ship: [2004] EWHC 1180 (Comm); [2005] 1 Lloyd’s Rep 219.

119  See the discussion in Law Commission, Sale of Goods Forming Part of a Bulk (Law Com. No. 215, 1993) Part II.

120  Re Wait [1927] 1 Ch. 606; Thames Sack & Bag Co. Ltd v Knowles & Co. Ltd (1918) 88 LJKB 585; Re Western Canada Pulpwood & Lumber Co. [1929] 3 WWR 544; AstraZeneca UK Ltd v Albemarle International Corp. [2011] EWHC 1574 (Comm) at [304]; [2011] 2 CLC 252.

121  For a laxer approach to ascertainment in cases where goods of the type and quantity agreed to be sold are removed from trading stock and then warehoused rather than delivered to the buyer, see Re Stapylton Fletcher Ltd [1994] 1 WLR 1181, discussed at paras 3.47–3.48.

122  [1995] 1 AC 74; see also Re London Wine Co. (Shippers) Ltd (1979) [1986] PCC 121.

123  Gillett v Hill (1834) 2 Cr. & M 530; Swanwick v Sothern (1839) 9 A & E 895; Campbell v Mersey Docks and Harbour Board (1863) 14 CB(NS) 412; Boswell v Kilborn (1858) 15 Moo. PC 309; Jenkyns v Usborne (1844) 7 Man. & Gr. 678.

124  Healy v Howlett & Sons [1917] 1 KB 337.

125  Ross v Eby (1877) 28 UCCP 316 (Can.).

126  [1927] 1 Ch. 606.

127  Note the disagreement on the facts between Atkin LJ, who thought that any parcel of 500 tons on the Challenger could have been tendered, regardless of the identity of the shipper, and Sargant LJ, who thought the opposite. The latter was surely correct given the clause in the contract naming the particular shipper and releasing Wait in the event of his named shipper failing to perform.

128  [1927] 1 Ch. 606, 629.

129  For the difficulties posed by s. 16 to the modern practice of bulk shipments of commodities, see B. Davenport [1986] LMCLQ 4, discussing the Dutch case of The Gosforth, 20 Feb. 1985, Rotterdam Comm. Ct., unreported.

130  Wait & James v Midland Bank (1926) 31 Com. Cas. 172.

131  Karlshamns Oljefabriker v Eastport Navigation Co. Ltd (The Elafi) [1982] 1 All ER 208. This result, and the one in Wait & James, is incorporated in s. 1(2) of the Sale of Goods (Amendment) Act 1995, amending the rules on unconditional appropriation by adding a new s. 18, Rule 5(3),(4), to the Sale of Goods Act 1979. These two provisions are rare examples of amending legislation confirming, rather than reversing, existing common law.

132  Law Com. No. 215, paras 2.5–6. See also Re Sugar Properties (Derisley Wood) Ltd [1988] BCLC 146.

133  In s. 61(1) of the Sale of Goods Act as amended by s. 2(c) of the Sale of Goods (Amendment) Act 1995.

134  Pursuant to s. 2(d) of the 1995 Act amending s. 61(1) of the Sale of Goods Act.

135  For the distinction between subject matter and shares thereof, in the constitution of a trust and the application of the certainty rule, compare Re London Wine Co. (Shippers) Ltd (1979) [1986] PCC 121, with Hunter v Moss [1994] 1 WLR 452, criticized by D. Hayton (1994) 110 LQR 335; see also Holland v Newbury [1997] 2 BCLC 369.

136  The seller may, of course, be in breach for non-delivery if a third party, such as a warehouseman, fails to do something, e.g., attorn to the buyer.

137  See the sympathetic approach to the buyer of the Canadian court in Coffey v Quebec Bank (1869) 20 UCCP 110, 113, affirmed (1869) 20 UCCP 555. Cf. Re Rose [1952] Ch. 499 (gift of shares and equitable interest in donee prior to registration of transfer by company); Pennington v Waine [2002] EWCA Civ 227; [2002] 1 WLR 2075.

138  Because the estoppel gives rise to a personal right (see Re London Wine Co. (Shippers) Ltd (1979) [1986] PCC 121) the insolvency of a seller renders worthless any estoppel against him: Re Goldcorp Exchange Ltd [1995] 1 AC 74.

139  See Laurie and Morewood v Dudin and Sons [1926] 1 KB 223; Woodley v Coventry (1863) 2 H & C 64; Knights v Wiffen (1870) LR 5 QB 660; Henderson v Williams [1895] 1 QB 521. In a Scottish case concerning the issue of ‘transfer notes’ issued by a warehouse in favour of buyers, the court held that the buyers obtained no proprietary interest in unseparated goods: Hayman & Son v M’Lintock 1907 SC 936.

140  Sterns Ltd v Vickers Ltd [1923] 1 KB 78.

141  Martineau v Kitching (1872) LR 7 QB 436, 454.

142  Rejected in Re Wait [1927] 1 Ch. 606, discussed at paras 3.39 et seq. See Law Reform Commission of Western Australia, Discussion Paper on Equitable Rules in Contracts for the Sale of Goods (Project no. 89, 1995), Ch. 4 (especially paras 4.35 et seq.).

143  The buyer’s argument to this effect was implicitly rejected, presumably because of its inconsistency with s. 16, by the Court of Appeal in Laurie and Morewood v Dudin and Sons [1926] 1 KB 223. Cf. Inglis v James Richardson & Sons (1913) 29 OLR 229 (Can.).

144  It was not challenged head on in Re Goldcorp Exchange Ltd [1995] 1 AC 74; see also Re Stapylton Fletcher Ltd [1994] 1 WLR 1181.

145  C.P. Henderson & Co. v Comptoir d’Escompte de Paris (1873) LR 5 PC 253.

146  The transfer of a bill of lading carries with it the property rights intended by the transferor: Sewell v Burdick (1884) 10 App. Cas. 74. On the failure of the law prior to 1995 to satisfy commercial expectations, see Law Com. No. 215, paras 3.3–4.

147  (1859) 7 HLC 290.

148  (1862) 10 HLC 191.

149  A defeasible sale: Keith v Burrows (1876) 1 CPD 722.

150  Lunn v Thornton (1845) 1 CB 379; explained as an application of the maxim nemo dat quod non habet by Willes J (arguendo) in Chidell v Galsworthy (1859) 6 CB (NS) 471, 473.

151  See P. Matthews [1981] LMCLQ 40.

152  Tailby v Official Receiver (1888) 13 App. Cas. 523.

153  Collyer v Isaacs (1881) 19 Ch. D 342. But it would not apply to property coming into the hands of a bankrupt upon his discharge from bankruptcy: Collyer v Isaacs.

154  (1862) 10 HLC 191.

155  (1862) 10 HLC 191, 211.

156  The limitation would surely exclude the (run-of-the-) mill machinery in Holroyd v Marshall (1862) 10 HLC 191.

157  See s. 52 of the Sale of Goods Act and Re Wait [1927] 1 Ch. 606.

158  (1862) 10 HLC 191, 209.

159  The Law Journal report records ‘a contract to sell the five hundred chests of a particular kind of tea which are now in my warehouse in Gloucester’ (emphasis added): (1862) 33 LJ Ch 193, 196. Predictably, the resultant ambiguity was relied upon in Re Wait [1927] 1 Ch. 606, to attack the notion of equitable property rights in sales law.

160  Re London Wine Co. Ltd (1979) [1986] PCC 121; Re Stapylton Fletcher Ltd [1994] 1 WLR 1181.

161  (1888) 13 App. Cas. 523, 545–8 (Lord Macnaghten).

162  Re Clarke (1887) 36 Ch. D 348, 352; see also Buckley LJ in Swiss Bank Corpn v Lloyds Bank Ltd [1982] AC 584, 595 (Buckley LJ). For conflicting statements on whether the defendant’s insolvency should incline a court to grant specific performance, see Anders Utkilens Rederei A/S v O/Y Louise Stevedoring Co. A/B [1985] 2 All ER 669, 674 (it should not) and Eximenco Handels AG v Partredereit Oro Chief [1983] 2 Lloyd’s Rep 509, 521 (it should); see further Ch. 11, paras 11.98–11.99.

163  See Tailby v Official Receiver (1888) 13 App. Cas. 523, 546–7.

164  [1927] 1 Ch. 606, strongly criticized by Sir F. Pollock (1927) 43 LQR 293. For delivery terms see para. 3.31.

165  Quaere a bill of lading that dealt with an unascertained portion of a larger bulk?

166  For such a trust to arise, the buyer’s money must be sufficiently dedicated to the purpose of acquiring the goods that it not may be mingled with the seller’s other moneys and it must be returned if the dedicated purpose cannot be performed: see M. Bridge (1992) 12 OJLS 333 and the case law therein discussed, including Barclays Bank Ltd v Quistclose Investments Ltd [1970] AC 567 and Re Kayford Ltd [1975] 1 All ER 604. In Re Goldcorp Exchange Ltd [1995] 1 AC 74, the buyer’s argument that his money was received by the seller in the capacity of fiduciary failed because the buyer’s purpose in making payment was to fulfil his sale obligations and there was no restriction imposed on the use by the seller of the money.

167  [1927] 1 Ch. 606, 616–21 and 630–4.

168  Before the trial judge, the buyer had also claimed a charge over the bulk to secure repayment of the purchase money.

169  (1862) 10 HLC 191.

170  [1927] 1 Ch. 606, 622.

171  Quaere s. 2(4)?

172  [1927] 1 Ch. 606, 636. But the buyer had also paid the price.

173  [1927] 1 Ch. 606, 635–6.

174  [1927] 1 Ch. 606, 629–30. Note also his criticism of the difficulty in determining when an equitable property passed to the buyer: [1927] 1 Ch. 606, 635.

175  His concern was that the efficacy of a seller’s pledge of the shipping documents with a bank would be undermined if the bank’s knowledge of the existence of a contract of sale were to be treated as knowledge of equitable interests arising thereunder: [1927] 1 Ch. 606, 639–40. Why should it?

176  Depending upon whether the pledge precedes the equitable assignment or vice versa.

177  [1927] 1 Ch. 606, 636. This concession is not referred to by Lord Brandon in Leigh and Sillavan Ltd v Aliakmon Shipping Ltd [1986] AC 785, 812–13, when he adopts Atkin LJ’s views on the need to exclude equitable proprietary principles from the scope of the Sale of Goods Act. The concession, however, is mentioned explicitly by Lord Mustill in Re Goldcorp Exchange Ltd [1995] 1 AC 74, where he too adopts Atkin LJ’s views.

178  [1927] 1 Ch. 606, 635.

179  The seller could not deal freely with stock the subject of a trust.

180  Re Goldcorp Exchange Ltd [1995] 1 AC 74, 91, 96–7.

181  [1927] 1 Ch. 606, especially 644–7, 655–6.

182  On this point, see also Clark v Scottish Imperial Insurance Co. (1879) 4 SCR 192 (Can.) (Ritchie J).

183  See also Bowen LJ in Re Clarke (1887) 36 Ch. D 348, 355.

184  A more receptive attitude to equitable proprietary principles may be evident in Australia: see Electrical Enterprises Pty Ltd v Rodgers (1989) 15 NSWLR 473, where the court gave the seller of goods an equitable (non-possessory) lien over them, declining to follow the Re Wait view that the Sale of Goods Act fully codified property rights; cf. Gilgandra Marketing Co-Operative Ltd v Australian Merchandise & Marketing Pty Ltd (No. 2) [2011] NSWSC 16 at [107] et seq. (where an unpaid seller’s claim for an equitable lien was rejected). See also International Finance Corpn v DSNL Offshore Ltd [2005] EWHC 1844; [2007] 2 All ER (Comm.) 305, which is not to be reconciled with the approach taken in Re Wait [1927] 1 Ch. 606, discussed at para. 3.61.

185  Hanworth MR and Sargant LJ. Atkin LJ insisted, against a plain reading of the contract, that the seller could have tendered from any shipment on board the Challenger.

186  [1995] 1 AC 74; McKendrick (1994) 110 LQR 514.

187  The Commission’s proposals, in line with the views of consultants, were confined to sales out of a particular bulk: Law Commission, Sale of Goods Forming Part of a Bulk (Law Com. No. 215, 1993), paras 3.10 and 4.1. For discussion of the report and the working paper, see A. Hudson [1989] LMCLQ 420; R. Bradgate and F. White [1994] LMCLQ 315.

188  Law Com. No. 215, 1993, paras 4.19–21.

189  Discussed at paras 3.51 et seq.

190  Laurie and Morewood v Dudin and Sons [1926] 1 KB 223 (where tenancy in common was argued for by the unsuccessful buyer, but no mention is made of tenancy in common in the judgments); Karlshamns Oljefabriker v Eastport Navigation Corpn (The Elafi) [1982] 1 All ER 208, 214. See Law Com. No. 215, paras 2.4 and 2.7.

191  [1994] 1 WLR 1181; N. Campbell [1996] JBL 199.

192  See Indian Oil Corpn v Greenstone Shipping SA [1988] QB 345.

193  Quaere a tenancy in common between the seller and one or more buyers?

194  Re London Wine Co. Ltd (1979) [1986] PCC 121, was distinguished by the existence of a defined bulk coupled with this process of segregation: [1994] 1 WLR 1181, 1194.

195  See Swindle v Matakana Estate Ltd [2011] NZHC 1345 at [82]; [2012] 1 NZLR 806; where the court suggests that the case might be regarded as one of ‘appropriation, followed by mixture’). In Crouch v Adams [2006] NSWSC 1029 at [37]–[38], the court was satisfied that once property had passed further to an appropriation, the buyer would still have rights by way of tenancy in common in the seller’s liquidation, even if unable precisely to identify his goods in the seller’s hands.

196  [1994] 1 WLR 1181, 1199.

197  See P. Watts (1990) 106 LQR 552, discussing Coleman v Harvey [1989] 1 NZLR 723; A. Hudson [1991] LMCLQ 23.

198  [2003] EWCA Civ 953. The case concerned the evasion of excise duty and s. 20A was raised at a late stage of the proceedings and not pursued in the Court of Appeal.

199  Discussed at paras 3.51 et seq.

200  As it was in Re Stapylton Fletcher Ltd [1994] 1 WLR 1181.

201  See Re Goldcorp Exchange Ltd [1995] 1 AC 74, 99.

202  Law Com. No. 215, para. 3.19. Extensive attention was devoted in this report to the particular question whether there should be a special rule for insolvency cases, not in the event recommended: see Ch. 4, paras 4.22–33.

203  Law Com. No. 215, para. 3.19.

204  [1927] 1 Ch. 606, 640.

205  Or that there is even a bulk: Re Goldcorp Exchange Ltd [1995] 1 AC 74.

206  CC Motor Sales Ltd v Chan [1926] SCR 485, 491; Workmen’s Compensation Board v US Steel Corpn (1956) 5 DLR (2d) 184; Commercial Credit Corpn v Niagara Finance Corpn [1940] SCR 420; Rogerson Lumber Co. Ltd v Four Seasons Chalet Ltd (1980) 29 OR (2d) 193. See also the old system of lien notes: A. Hogg (1924) 2 Can. Bar Rev 491.

207  Belvoir Finance Co. Ltd v Stapleton [1971] 1 QB 210; Wickham Holdings Ltd v Brooke House Motors Ltd [1967] 1 All ER 117.

208  See M. Bridge, L. Gullifer, G. McMeel, and S. Worthington, The Law of Personal Property (Sweet & Maxwell, 2013), ch. 16.

209  Other examples showing that the law does not stop at the formal structure of hire purchase include Whiteley v Hilt [1918] 2 KB 808 (assignability of option rights); Transag Haulage Ltd v Leyland DAF Finance plc [1994] BCC 356 (relief against forfeiture); Consumer Credit Act 1974, ss. 90, 132 (limits on the right of repossession).

210  J. Ulph [1996] LMCLQ 93; L. Gullifer [1999] LMCLQ 93; R. Goode, Commercial Law (3rd edn, E. McKendrick, Penguin, 2004), 240–50; N. E. Palmer and E. McKendrick, Interests in Goods (2nd edn, LLP, 1998), ch. 16 (McKendrick).

211  These are to be found in ss. 16, 18(3), (4), 20A, 20B, and 61(1) (‘bulk’, ‘delivery’, ‘goods’, ‘specific goods’).

212  See Law Commission, Sale of Goods Forming Part of a Bulk (Law Com. No. 215, 1993), para. 3.47.

213  Evidently with other buyers in the same position and/or the seller, to the extent that the seller retains an interest in the bulk.

214  S. 61(1).

215  An unduly narrow view of a bulk may have been taken by a court, applying identical Singapore legislation, in RBG Resources plc v Banque Cantonale Vaudoise [2004] 3 SLR (R) 421 at [66]–[76] (mingled copper, nickel, and tin), given that the various parts could have been separated.

216  See Ch. 3, para. 3.68 and Ch. 10, para. 10.68.

217  Law Com. No. 215, para. 4.3.

218  See Re Goldcorp Exchange Ltd [1995] 1 AC 74.

219  Cf. RBG Resources plc v Banque Cantonale Vaudoise [2004] 3 SLR (R) 421 at [66]–[76], where warehouse receipts did not identify the particular warehouse site where metal was being stored.

220  Cf. Re Goldcorp Exchange Ltd [1995] 1 AC 74.

221  Cf. the views of Atkin LJ, expressed in Re Wait [1927] 1 Ch. 606, that the sellers could have performed the contract out of any cargo on the Challenger, and not just that portion of the cargo for which they held a bill of lading: discussed at para. 3.31.

222  For the meaning of which see Ch. 6, para. 6.81.

223  The buyer’s share may therefore increase incrementally as payment is progressively made. The size of the buyer’s share corresponds directly to the size of the part-payment (a unit pricing approach): s. 20A(6).

224  S. 20A(5).

225  See the definition of ‘delivery’ in s. 61(1), as amended by s. 2(b) of the 1995 Act.

226  Subject to the application of s. 18, Rule 5.

227  And those of other co-owners increased.

228  See para. 3.57.

229  See Spence v Union Marine Insurance Co. (1868) LR 3 CP 427; M. Bridge, Personal Property Law (3rd edn, Clarendon Law, 2002), 110–11.

230  The sum that the seller, as voyage charterer of the ship, would have to pay the owner to compensate for the lower freight earned from the shipment of a light cargo.

231  This is not the case where, after marine transport, the contract provides for physical delivery onshore at the destination port: Comptoir d’Achat et du Boerenbond Belge S/A v Luis da Ridder Lda (The Julia) [1949] AC 293. The risk of loss prior to delivery is on the seller, regardless of whether the property in the goods has passed to the buyer.

232  Law Com. No. 219, para. 4.14.

233  It may not even apply to all cases involving only buyers. One buyer may be the purchaser, not of a quantity of unascertained goods, but of a seller’s undivided interest in those goods. That buyer does not acquire rights under s. 20A, which applies only to contracts for the sale of a specified quantity of unascertained goods (sub-s. (1); see also para. 3.33). On one reading, the sharing rules in s. 20A apply only to those buyers who qualify under s. 20A itself. The time-honoured practice of extending the Sale of Goods Act by analogy, however, is less easy to justify in the case of amending provisions that are not declaratory of the common law.

234  Inglewood Pulp and Paper Company Ltd v New Brunswick Electric Power Commission [1928] AC 492, 499.

235  As does the Report itself: Law Com. No. 216, paras 4.15 et seq.

236  Whether the sub-buyer’s entitlement could be expanded with the aid of s. 25(1) is discussed in Ch. 5, para. 5.166.

237  Whether the sub-buyer’s entitlement could be expanded beyond the buyer’s proprietary share with the aid of s. 25(1) is discussed in Ch. 5, para. 5.166.

238  Sale of Goods Act, s. 61(1).

239  Under Law of Property Act 1925, s. 188. See Law Com. No. 215, paras 4.15–16.

240  In this respect, it falls short of the Law Commission recommendation, which would have sanctioned deliveries in excess of contractual entitlement: Law Com. No. 215. para. 4.21.

241  Four Point Garage Ltd v Carter [1985] 3 All ER 12; E & S Ruben Ltd v Faire [1949] 1 KB 254.

242  See Law Com. No. 215, para. 4.17.

243  Sale of Goods Act, s. 61(1).

244  S. 20B(3)(a). But co-owning buyers are free to agree otherwise amongst themselves: s. 20B(3)(b). Unless they all contract with the seller on the same standard form making such provision, it is unlikely that such a bargain will be struck.

245  See Law Com. No. 215, para. 4.17.

246  See Law Com. No. 215, para. 4.17 and Grange & Co v Taylor (1904) 19 TLR 386, discussed at length therein. But co-owning buyers are free to agree otherwise amongst themselves: s. 20B(3)(b). Unless they all contract with the seller on the same standard form making such provision, it is unlikely that such a bargain will be struck.

247  A point not recognised by the Law Commission in Law Com. No. 215, para. 4.21.

248  Hollins v Fowler (1875) LR 7 HL 457 (Blackburn J).

249  S. 20B(3)(c) (e.g. any action against the seller for non-delivery of agreed goods would remain).

250  But the risk of shrinkage in certain contracts will be on the buyer: Law Com. No. 215, para. 3.54.

251  M. G. Bridge, The International Sale of Goods (3rd edn, OUP, 2013), para. 8.44.

252  Law Com. No. 215, para. 4.9.

253  Discussed at paras 3.61 et seq.

254  Carlos Federspiel & Co. SA v Charles Twigg & Co. Ltd [1957] 1 Lloyd’s Rep 240, discussed at para. 3.65.

255  S. 41 of the Sale of Goods Act does not refer to the possibility of a partial lien under an entire contract. Cf. s.42.

256  S. 31(1), concerning the buyer’s right to resist delivery in instalments under an entire contract, should be seen as expressive of a broader rule that would allow the seller also to refuse delivery in instalments.

257  Sale of Goods Act, s. 39(1)(a).

258  Re Goldcorp Exchange Ltd [1995] 1 AC 74, 90. See also Gibson v Stockco Ltd [2010] NZHC 2398 at [218]–[225].

259  See para. 3.33.

260  Sale of Goods Act, s. 61(1) (‘goods’).

261  Sale of Goods Act, s. 61(1) (‘specific goods’).

262  Likewise the embargo on the passing of property in future goods in s. 5(3) lifted when they become existing goods.

263  Although a purchaser’s equitable lien over goods for moneys prepaid by the purchaser has not generally found favour in English law, support for the acquisition of such a right by operation of law is to be found in International Finance Corpn v DSNL Offshore Ltd [2005] EWHC 1844; [2007] 2 All ER (Comm.) 305. That case concerned an oil company that concluded a contract for labour and materials with a contractor, with ownership of the installation manufactured by the latter to pass to the oil company upon completion. Instead of the contractor paying for the supply of parts by a third party and then invoicing the oil company, it was agreed that the oil company would pay the third party directly (though the contract for the sale of the parts remained between the third party and the contractor). In view of the fact that the parts had ‘characteristics specifically designed for the requirements of the purchaser’ (International Finance, at [60]), and the facility with which the oil company could have obtained an injunction to prevent the parts being used otherwise than on the installation (had it ever been necessary to do so), the oil company acquired an equitable lien in the parts for which it had paid. The equitable lien existed even where the labour and materials contract fell within the Sale of Goods Act (sic): International Finance, at [60]. No such lien would arise in the case of ‘ordinary commercial goods’: International Finance, at [49] (applying Transport and General Credit Corpn v Morgan [1939] Ch 531, 546). The reasoning in this case (which is not to be reconciled with Re Wait [1927] 1 Ch. 606), could apply just as well to a simple bilateral case where a purchaser prepays the seller for goods that are or become ascertained; see also Hewitt v Court (1983) 149 CLR 639, on which the court in International Finance relied, and Gilgandra Marketing Co-Operative Ltd v Australian Merchandise & Marketing Pty Ltd (No. 2) [2011] NSWSC 16, emphasizing at [108] that the contract must be amenable to specific performance.

264  An implied intention may oust the presumptive rule: Kulkarni v Motor Credit (Davenham) Ltd [2010] EWCA Civ 69 at [29] and [45]; [2010] 2 All ER (Comm) 1017 (Rix LJ). See also para. 3.03.

265  See para. 3.32 and The Elafi [1982] 1 All ER 208.

266  See also Kulkarni v Motor Credit (Davenham) Ltd [2010] EWCA Civ 69 at [22]; [2010] 2 All ER (Comm) 1017 (Rix LJ).

267  Gilmour v Supple (1858) 11 Moo. PC 551.

268  This contractual feature is not as well developed here as it has been for sale of land where the contract of sale may merge in the later conveyance.

269  Wait v Baker (1848) 2 Ex. 1, 8–9:The word appropriation may be understood in different senses. It may mean a selection on the part of the vendor, where he has the right to choose the article which he has to supply in performance of his contract... Or the word may mean, that both parties have agreed that a certain article shall be delivered in pursuance of the contract, and yet the property may not pass in either case... ‘Appropriation’ may also be used in another sense...viz. where both parties agree upon the specific article in which the property is to pass, and nothing remains to be done in order to pass it.

270  See the use of the word in c.i.f. sales discussed in para. 3.63.

271  This would correspond to the first of Baron Parke’s meanings: (1848) 2 Ex. 1, 7.

272  Subject to the right, if it exists, to substitute another appropriation. See M. G. Bridge, The International Sale of Goods (3rd edn, OUP, 2013), paras 4.32–4.33.

273  As where the seller appropriates the entire contents of a particular hold.

274  Because the seller will reserve the right of disposal under s. 19 until payment is made: discussed at paras 3.73 et seq.

275  In view of reservation of the right of disposal in s. 19 (see paras 3.81 et seq), little attention has been paid under Rule 5 to the making of an appropriation that is conditional. See, however, cases where arguments have been unsuccessfully advanced that, where there is a physical delivery of goods further to a c.i.f. contract, the passing of property in the goods is dependent upon a later tender of the shipping documents, no longer serving their original purpose because of the physical delivery, being a compliant one: Huyton SA v Peter Cremer GmbH and Co [1999] 1 Lloyd’s Rep 620, 633; Trafigura Beheer BV v BCL Trading GmbH [2002] EWCA Civ 251 at [28]; Cie Noga d’Importation et d’Exportation SA v Abacha (No. 3) [2002] EWCA Civ 1142; [2003] 1 WLR 307 at [94]–[108] (Rix LJ).

276  Heyward’s Case (1595) 2 Co. Rep. 35a. For the modern definition of election, see Peyman v Lanjani [1985] Ch. 457, discussed in Ch. 6, paras 6.120 et seq.

277  But see Borrowman, Phillips & Co. v Free & Hollis (1878) 4 QBD 500 for the view that the appropriation of a cargo that does not comply with the contract is binding on the seller only if the buyer accepts it. Sed quaere?

278  Hayes Bros Buick-Opel-Jeep Inc. v Canada Permanent Trust Co. (1976) 15 NBR (2d) 166. Cf. Kulkarni v Motor Credit (Davenham) Ltd [2010] EWCA Civ 69 at [38]; [2010] 2 All ER (Comm) 1017 (Rix LJ) (property in a car passing on delivery and not when the buyer insured a car after being notified of the registration number).

279  [1919] 1 KB 459. The goods were deliverable on ex warehouse terms, for the meaning of which see Fisher Reeves and Co. Ltd v Armour and Co. Ltd [1920] 3 KB 614.

280  On assent, see paras 3.69–3.70.

281  The word ‘unconditional’ is not used, which is typical of the pre-Act authorities. This makes Wait v Baker (1848) 2 Ex. 1, difficult to apply today. The word is also absent in s. 19(1).

282  Aldridge v Johnson (1857) 7 E & B 855; Langton v Higgins (1859) 4 H & N 402. See also Bacardi-Martini Beverages Ltd v Thomas Hardy Packaging Ltd [2002] 1 Lloyd’s Rep 62 at [49] (bottles and labels, as well as promotional material, supplied by the buyer).

283  The whole bulk in the case of Langton v Higgins (1859) 4 H & N 402.

284  See Edwards v Ddin [1976] 1 WLR 942 (property passed when petrol fed into the tank of the defendant’s car). Cf. R v Thomas [1928] 2 WWR 608 (passing of property conditional upon payment being made); Addy v Blake (1887) 19 QBD 478; Noblett v Hopkinson [1905] 2 KB 214. As for the possibility that a tenancy in common arises in a commingled mass, see P. Watts (1990) 106 LQR 552.

285  (1916) 88 LJKB 448.

286  See also Godts v Rose (1855) 17 CB 229. But that seller could be protected by a lien and does not need the general property as such.

287  [1957] 1 Lloyd’s Rep 240. Quaere the seller who ships goods under the terms of a sea waybill entitling him, as against the carrier, to change the identity of the named consignee when the goods are in transit?

288  Cf. the Canadian case of NEC Corpn v Steintron Electronics Ltd (1985) 50 CBR (NS) 91, where, on similar facts, the court held that the property had passed since the seller in practice always shipped out goods already addressed to the named buyer.

289  Pearson J speaks of appropriation but means unconditional appropriation.

290  Quaere the seller who packs and labels the goods but who uses his own employee to deliver them at the buyer’s premises? For a nuanced interpretation of Rule 5(2), see para. 3.72.

291  See Kulkarni v Motor Credit (Davenham) Ltd [2010] EWCA Civ 69 at [38]; [2010] 2 All ER (Comm) 1017 (Rix LJ).

292  Laurie and Morewood v Dudin and Sons [1926] 1 KB 223; Wardar’s Import and Export Co. Ltd v W Norwood & Sons Ltd [1968] 2 QB 663.

293  Langton v Higgins (1859) 4 H & N 402 (Bramwell B); Aldridge v Johnson (1857) 7 E & B 855 (Crompton J).

294  [1994] 1 WLR 1181.

295  See also the discussion at para. 3.60 of the gap between the separation from bulk of goods the subject of a buyer’s undivided interest and the unconditional appropriation of those goods.

296  S. 20A of the Sale of Goods Act as added by s. 1(3) of the 1995 Act.

297  S. 61 of the Sale of Goods Act as added by s. 2(a) of the 1995 Act. See discussion at para. 3.52.

298  [1957] 1 Lloyd’s Rep 240.

299  This is not a case of treating the seller’s general trading stock as a bulk: see para. 3.52.

300  Discussed at para. 3.12.

301  Philip Head & Sons Ltd v Showfronts Ltd [1970] 1 Lloyd’s Rep 140. See also Pritchett & Gold v Currie [1916] 1 Ch. 515; Hendy Lennox Ltd v Grahame Puttick Ltd [1984] 1 WLR 485; Anderson v Morice (1876) 1 App. Cas. 713 (Lord Blackburn: incomplete loading of ship), sed quaere? since the section speaks of deliverable and not delivered state. In contracts for the sale of bottled drinks in public houses, it has been held for the purpose of environmental regulations that the property passes in the bottle as well as in its contents at the time the publican selects the particular bottle on the shelf and regardless of whether the customer drinks from a glass or takes the bottle away: R (on the application of Valpac Ltd) v Environment Agency [2002] EWHC 1510 (Admin); [2002] Env. LR 36 at [33]. The buyer, however, may not confidently insist on having the bottle: ‘Even though, with the consent of the buyer, the drink may be served in a glass and the publican may himself throw away the bottle, it is still the customer’s bottle. The legal nature of the sale is not affected by the fact that, for the purposes of maintaining order, a publican may insist on retaining a bottle or having it returned, should that be necessary to avoid disturbance’: R (on the application of Valpac Ltd), at [36]. Given the circumstances of the transaction, including the fact that the customer will not yet have paid, the conclusion that property passes in the bottle at all, and if so at the point of selection by the publican, is open to some doubt: see Geddling v Marsh [1920] 1 KB 668, 672.

302  Vigers Bros v Sanderson Bros [1901] 1 KB 608; Hammer and Barrow v Coca-Cola [1962] NZLR 723, 731.

303  Discussed in Ch. 7, paras 7.04 et seq.

304  See para. 3.69.

305  Kulkarni v Motor Credit (Davenham) Ltd [2010] EWCA Civ 69 at [42]; [2010] 2 All ER (Comm) 1017 (Rix LJ) (where it is expressed as applying to a seller who knows ‘that it had no property’, though the buyer’s assent should not depend upon such knowledge).

306  Wait v Baker (1848) 2 Ex. 1, 7 (‘necessary...that the goods should agree with the contract’); Ollett v Jordan [1918] 2 KB 41.

307  Hardy & Co. (London) v Hillerns & Fowler [1923] 2 KB 490, 499 (Atkin LJ); McDougall v Aeromarine of Emsworth Ltd [1958] 1 WLR 1126, 1132; Kwei Tek Chao v British Traders & Shippers Ltd [1954] 2 QB 459, 487–8; Re Redfern Resources Ltd 2011 BCSC 771 at [46] et seq., noting at [55] that ss. 34–5 ‘do not link acceptance to the passing of property’.

308  Cunliffe v Harrison (1851) 6 Ex. 903 (larger quantity than ordered); Levy v Green (1859) 1 E & E 969 (action for goods sold and delivered: smaller quantity than ordered, together with goods of a different description).

309  Colonial Insurance Co. of New Zealand v Adelaide Marine Insurance Co. (1886) 12 App. Cas. 128, 140; McDougall v Aeromarine of Emsworth Ltd [1958] 1 WLR 1126, 1130.

310  Bryans v Nix (1839) 4 M & W 775; Anderson v Morice (1876) 1 App. Cas. 713. See, however, Colonial Insurance Co. of New Zealand v Adelaide Marine Insurance Co. (1886) 12 App. Cas. 128, where the court was plainly concerned to give the buyer an insurable interest in cargo loaded from time to time. The courts have not denied the incremental passing of property as goods are removed from storage: Rohde v Thwaites (1827) 6 B & C 388; Aldridge v Johnson (1857) 7 E & B 855.

311  The usual clause provides for the property to pass at the first permanent hose connection. See M. G. Bridge, The International Sale of Goods (3rd edn, OUP, 2013), para. 7.49.

312  See Godts v Rose (1855) 17 CB 229; Campbell v Mersey Docks and Harbour Board (1863) 14 CB(NS) 412, 415–16.

313  Ginner v King (1890) 7 TLR 140.

314  Blackburn on Sale (2nd edn, by J. C. Graham, Stevens, 1885), 139–40.

315  Copp v Rhindress (1921) 67 DLR 782; Pullan v Speizman (1921) 67 DLR 365.

316  Carlos Federspiel & Co SA v Charles Twigg & Co. Ltd [1957] 1 Lloyd’s Rep 240, 255; Crouch v Adams [2006] NSWSC 1029 at [38].

317  Wilkins v Bromhead (1844) 6 M&G 963, 974. This proposition was cautiously received as ‘interesting’ in Kulkarni v Motor Credit (Davenham) Ltd [2010] EWCA Civ 69 at [34]; [2010] 2 All ER (Comm) 1017 (Rix LJ).

318  See para. 3.61.

319  See para. 3.08.

320  Whether it is a case of the seller retracting consent or rescinding the contract, the buyer will have a voidable title transmissible to a good faith purchaser: see Ch. 5, paras 5.47 et seq.

321  [1919] 1 KB 459.

322  See Jenner v Smith (1869) LR 4 CP 270; Atkinson v Bell (1828) 8 B & C 277.

323  Sells Ltd v Thomson Stationery Ltd (1914) 6 WWR 731 (Can.); Butterick Publishing Co. v White & Walker (1914) 6 WWR 1394 (Can.); Mason & Risch Ltd v Christner (1918) 44 OLR 146, affd (1920) 48 OLR 8 (Can.) (revocation of seller’s agency to make unconditional appropriation).

324  See White & Carter (Councils) Ltd v McGregor [1962] AC 413.

325  See Ch. 12.

326  Xenos v Wickham (1867) LR 2 HL 296, 316; Mucklow v Mangles (1808) 1 Taunt. 318. Or designed for the buyer’s special use: Atkinson v Bell (1828) 8 B & C 277.

327  See Xenos v Wickham (1867) LR 2 HL 296; Donaghy’s Rope and Twine Co. v Wright Stephenson & Co. (1906) 25 NZLR 641.

328  S. 34; discussed in Ch. 10, paras 10.47 et seq.

329  Naugle Pole & Tie Co. v Wilson [1929] 3 WWR 730. Examination could also be assent to a later ascertainment from a specific bulk: Rohde v Thwaites (1827) 6 B & C 388. Cf. Wardar’s Import and Export Co. Ltd v W Norwood & Sons Ltd [1968] 2 QB 663.

330  Colonial Insurance Co. of New Zealand v Adelaide Marine Insurance Co (1886) 12 App. Cas. 128; McDougall v Aeromarine of Emsworth Ltd [1958] 1 WLR 1126.

331  e.g., Perkins v Bell [1893] 1 QB 193.

332  Pletts v Beattie [1896] 1 QB 519; Furby v Hoey [1947] 1 All ER 206.

333  Noblett v Hopkinson [1905] 2 KB 214 (semble); Caradoc Nurseries Ltd v Marsh (1959) 19 DLR (2d) 491; Coupland v Elmore [1928] 1 WWR 380; R v Chappus (1920) 48 OLR 189 (Can.). This latter approach is more consistent with the last act approach adopted in Carlos Federspiel & Co. SA v Charles Twigg & Co. Ltd [1957] 1 Lloyd’s Rep 240.

334  It may be that more than one carrier is engaged, in which case the appropriate carrier is the one whose possession marks delivery to the buyer for performance of the contract of sale: Matthew Short & Associates Pty Ltd v Riviera Marine (International) Pty Ltd [2001] NSWCA 281.

335  See s. 19 (shipping documents transferred after delivery to carrier).

336  Carlos Federspiel & Co. SA v Charles Twigg & Co. Ltd [1957] 1 Lloyd’s Rep 240; Atkinson v Plimpton (1903) 6 OLR 566 (Can.); William Blackley Ltd v Elite Costumes Ltd (1905) 9 OLR 382. The Post Office is a carrier for this purpose: Badische Anilin und Soda Fabrik v Basle Chemical Works [1898] AC 200; T. Comedy (UK) Ltd v Easy Managed Transport Ltd [2007] EWHC 611; [2007] 2 Lloyd’s Rep 297 at [47]. The rule is, of course, subject to a contrary intention: Mooney v Lipka [1926] 4 DLR 647; National Coal Board v Gamble [1959] 1 QB 11. The court declined to find a contrary intention where it was the seller’s practice to insure goods dispatched to its customers in H. B. McGuiness Ltd v Dunford (1958) 13 DLR (2d) 622.

337  National Coal Board v Gamble [1959] 1 QB 11 (weighing the goods).

338  Winnipeg Fish Co. v Whitman Fish Co. (1909) 41 SCR 453; Steel Co. of Canada Ltd v The Queen [1955] SCR 161; Beaver Specialty Ltd v Donald H Bain Ltd (1973) 39 DLR (3d) 574. If the delivery term were f.o.b. the place of shipment, the buyer would have to arrange and pay for freight.

339  See also Re Grainex Canada Ltd (1987) 34 DLR (4th) 646.

340  Laurie and Morewood v Dudin and Sons [1926] 1 KB 223; Wardar’s Import and Export Co. Ltd v W Norwood & Sons Ltd [1968] 2 QB 663.

341  Sc. unconditional appropriation.

342  Re Shipton, Anderson & Co. and Harrison & Co. [1915] 3 KB 676 (‘payment cash within seven days against transfer order’). Reserving the right of disposal of specific goods may not happen after the contract date if the property has already passed: Dennant v Skinner [1948] 2 KB 164; Sirius Shipping Corp. v The Ship Sunrise [2006] NSWSC 398. The seller does not have the unilateral right to divest the buyer of the general property. S. 19(1) deals with both specific goods and unascertained goods (the former being referred to in explicit terms). It permits the seller to reserve the right of disposal by the terms of the contract, which can presumably be done for unascertained goods as well as for specific goods, and by the terms of the appropriation of the goods to the contract after the contract has been concluded. The case of appropriation can only refer to unascertained goods since no appropriation of specific goods takes place after the contract date: specific goods are attached to the contract from the contract date and do not need to be appropriated to it.

343  Gabarron v Kreeft (1875) LR 10 Ex. 274. See also The San Nicholas [1976] 1 Lloyd’s Rep 8, where the contract provided for the property to pass upon shipment but the sellers took out a bill of lading providing for delivery to their own order. Lord Denning thought there was at least a prima facie case that the property in the goods passed upon the transfer of the bill of lading. If it were argued that firmer evidence of an intention to reserve the right of disposal is needed where a seller’s action is contrary to the provisions of the contract, the response would be that having a bill of lading drawn to the seller’s own order is the very case of reservation dealt with in s. 19(2).

344  S. 19(2), (3).

345  This is true of f.o.b. contracts (Wait v Baker (1848) 2 Ex. 1) but clearly a fiction in the case of c.i.f. buyers (see Ch. 6, para.6.56). See Scottish & Newcastle International Ltd v Othon Ghalanos [2006] EWCA Civ 1750; [2007] 2 Lloyd’s Rep 341, affirmed [2008] UKHL 11; [2008] 1 Lloyd’s Rep 462.

346  Mitsui & Co. Ltd v Flota Mercante Grancolombiana SA (The Ciudad de Pasto) [1988] 2 Lloyd’s Rep 208 (f.o.b.); Transpacific Eternity SA v Kanematsu Corpn (The Antares III) [2002] 1 Lloyd’s Rep 233, 236 (f.a.s.).

347  Discussed in Ch. 3, para. 3.87.

348  Wait v Baker (1848) 2 Ex. 1. Where the contract allows credit to the buyer, the passing of property rules in ss.17–18 will apply in the normal way, even though the seller may still control the bill of lading after the property passes in accordance with those sections: Scottish & Newcastle International Ltd v Othon Ghalanos Ltd [2006] EWCA Civ 1750 at [19]; [2007] 2 Lloyd’s Rep 341.

349  The Albazero [1977] AC 774; Ross T. Smyth & Co. Ltd v T.D. Bailey, Son & Co. [1940] 3 All ER 60.

350  The Albazero [1977] AC 774 (Brandon J).

351  Though the statutory presumption does not apply in such cases, a seller on the facts is likely to reserve the right of disposal when retaining other delivery documents such as delivery warrants and orders which, though not documents of title at common law, are in fact effective means of securing delivery from carriers and other bailees. Another case is where the seller consigns goods to himself under a sea waybill, which is a non-negotiable document that is not delivered to the consignee, reserving the right to give the carrier fresh delivery instructions.

352  Before the enactment of the statutory presumption, the Court of Exchequer Chamber in Browne v Hare (1859) 4 H & N 822 had declined to overturn a jury finding that the taking out of a bill of lading ‘unto shippers’ order or their assigns’ did not show an intention to reserve the general property. The approach of the court was coloured by its view that a seller who reserved the right of disposal could not be said to have shipped the goods free on board as required by the contract, a view that would not be entertained today: see Mitsui & Co. Ltd v Flota Mercante Grancolombiana SA (The Ciudad de Pasto) [1988] 2 Lloyd’s Rep 208, 213.

353  Browne v Hare (1859) 4 H & N 822. The reservation must not occur too late or the seller will be taken to have unconditionally appropriated the goods: Ogle v Atkinson (1814) 5 Taunt. 759.

354  [1977] AC 774, 799.

355  S. 41.

356  But by notices of appropriation, the goods may be made the subject of repeated c.i.f. contracts in string trading conditions.

357  See Ch. 6, para. 6.61.

358  See Ch. 11, paras 11.44 et seq.

359  Donald v Suckling (1866) LR 1 QB 585; Franklin v Neate (1844) 13 M & W 481 (but see the discussion of mercantile agency and the factor’s lien in Ch. 5, paras 5.87 et seq). A lienee cannot sell the lien, nor may it be taken in execution by a sheriff: Legg v Evans (1840) 6 M & W 36. Although a lienee has no power of sale at common law (Thames Iron Works Co. v Patent Derrick Co. (1860) 1 J & H 93), a seller in these circumstances would resort to the power of sale in s. 48.

360  Van Casteel v Booker (1848) 2 Ex. 691.

361  The Albazero [1977] AC 774.

362  Wait v Baker (1848) 2 Ex. 1, 9 (500 qtrs of barley).

363  James v The Commonwealth (1939) 62 CLR 339, 378; Wait v Baker (1848) 2 Ex. 1; Mirabita v Imperial Ottoman Bank (1878) 3 Ex. D 164 (Cotton LJ); The Miramichi [1915] P 71; The Prinz Adalbert [1917] AC 586. In Ross T. Smyth & Co. Ltd v T.D. Bailey Son & Co. [1940] 3 All ER 60, 68, Lord Wright thought it essential.

364  This seems the best explanation of the judgment of Bramwell LJ in Mirabita v Imperial Ottoman Bank (1878) 3 Ex. D 164.

365  In Van Casteel v Booker (1848) 2 Ex. 691, where the goods had been loaded on the buyer’s own ship, the court was content to say only that the reserving seller had preserved his right of stoppage in transitu.

366  Ogg v Shuter (1875) 1 CPD 47, 50–1 (Lord Cairns LC).

367  The Parchim [1918] AC 157, 170–1, referred to as decided on ‘very special facts’ in The Kronprinsessan Margareta [1921] 1 AC 486, 516 (Lord Sumner).

368  Joyce v Swann (1864) 17 CBNS 84; see also The Albazero [1977] AC 774.

369  Van Casteel v Booker (1848) 2 Ex. 691: seller’s right of stoppage therefore preserved when otherwise it would have been lost since a delivery to the buyer’s ship is a delivery to the buyer; see also Turner v Liverpool Docks Trustees (1851) 6 Ex. 453.

370  Gabarron v Kreeft (1875) LR 10 Ex. 274.

371  James v The Commonwealth (1939) 62 CLR 339, 380; Shepherd v Harrison (1871) LR 5 HL 116, 128, 131; Van Casteel v Booker (1848) 2 Ex. 691.

372  Hansson v Hamel and Horley Ltd [1922] 2 AC 36, 43 (Lord Sumner); The Kronprinsessan Margareta [1921] 1 AC 486. Note that in Arnhold Karberg & Co. v Blythe Green Jourdain & Co. [1915] 2 KB 379, 387, Scrutton J states that in such a case the buyer acquires the general property on tendering the price whereas, in other cases where the right of disposal is reserved, the property passes upon payment.

373  Ladenburg & Co. v Goodwin, Ferreira & Co. [1912] 3 KB 275: also stating that the transfer of the general property did not affect the right of stoppage in transit for non-payment.

374  Mitchell v Ede (1840) 11 Ad. & E 888, 903; Elder Dempster Lines Ltd v Zaki Ishag [1983] 2 Lloyd’s Rep 548, 555.

375  The buyer has no lien over the bill of lading for any freight paid: Rew v Payne Douthwaite (1885) 53 LT 932.

376  Shepherd v Harrison, (1871) LR 5 HL 116; Brandt v Bowlby (1831) 2 B & Ad. 932; Jenkyns v Brown (1849) 14 QB 496; Wilmshurst v Bowker (1841) LJCP 161. Cf. Key v Colesworth (1852) 7 Ex. 594.

377  Sewell v Burdick (1884) 10 App. Cas. 74; Sanders Bros v Maclean & Co. (1883) 11 QBD 327; Burgos v Nascimento (1908) 11 LT 71; The Orteric [1920] AC 274.

378  Leigh and Sillavan Ltd v Aliakmon Shipping Ltd [1986] AC 785.

379  Dracachi v Anglo-Egyptian Navigation Co. (1868) LR 3 CP 190; rebutted in Leigh and Sillavan Ltd v Aliakmon Shipping Ltd [1986] AC 785.

380  Under s. 25(1) of the Sale of Goods Act or s. 9 of the Factors Act 1889; see Cahn v Pockett’s Bristol Channel Steam Packet Co. Ltd [1899] 1 QB 643.

381  Aluminium Industrie Vaassen BV v Romalpa Aluminium Ltd [1976] 1 WLR 676. See generally G. McCormack, Reservation of Title (2nd edn, Sweet & Maxwell, 1995); S. Wheeler, Reservation of Title Clauses (OUP, 1991); Palmer’s Company Law (G. K. Morse (ed.), Sweet & Maxwell, loose-leaf), iii, ch. 13; L. S. Sealy and R. J. A. Hooley, Text and Materials in Commercial Law (4th edn, OUP, 2008), 452–70; N. E. Palmer (1993) 6 J of Cont. Law 175.

382  Unless there is a fund of assets, which includes floating charge assets, giving rise to a fund valued between £10,000 and £600,000, out of which payments are to be made to unsecured creditors: Insolvency Act 1986, s. 176A. See H. Beale, M. Bridge, E. Lomnicka, and L. Gullifer, The Law of Security and Title-Based Financing (2nd edn, OUP, 2012), paras 20.24–20.35.

383  The treatment given to unsecured creditors is criticized as a ‘raw deal’ by Templeman LJ in Borden (UK) Ltd v Scottish Timber Products Ltd [1981] Ch. 25, 42.

384  If the clause on its proper construction provides for payment in full, the buyer will acquire no incremental property rights commensurate with part payment: Wincanton Group Ltd v Garbe Logistics UK 1 SARL [2011] EWHC 905 (Ch) (‘full payment’).

385  Companies Act 2006, ss. 859A et seq.

386  For a more elaborate classification of these clauses, see G. McCormack, Reservation of Title (2nd edn, Sweet & Maxwell, 1995), 2.

387  This is because (a) the preparation of documents for registration is expensive; (b) the Companies Act and the rules of priority (notably, the rules on tacking future advances to an earlier charge), together, do not lend themselves to a single registration for multiple supplies of goods; and (c) the seller would, in any event, obtain only the protection of a weak floating charge with limited enforcement rights and a subordinated standing in the event of the buyer’s insolvency.

388  Aluminium Industrie Vaassen BV v Romalpa Aluminium Ltd [1976] 1 WLR 676; Clough Mill Ltd v Martin [1985] 1 WLR 111.

389  Re BA Peters Plc [2008] EWHC 2205 (Ch) at [86]; Hendy Lennox (Industrial Engines) Ltd v Grahame Puttick Ltd [1985] 1 WLR 485, 495; Fairfax Gerrard Holdings Ltd v Capital Bank Plc [2007] EWCA Civ 1226; [2007] 2 CLC 896; Four Point Garage Ltd v Carter [1985] 3 All ER 12. The buyer’s authority to sell was in one case even held to survive the buyer’s entry into administration: Sandhu v Jet Star Retail Ltd [2011] EWCA Civ 459.

390  The seller must either unconditionally appropriate the goods or must assent to an unconditional appropriation by the buyer. Where it is the buyer who assents, the assent is often implied, but an implied assent by the seller is less likely in the nature of things. Note also that s. 19(1) refers to the seller reserving the right of disposal ‘by the terms of the contract or appropriation’ (emphasis added). Even if the seller has contracted to pass the property to the buyer at an earlier date, yet his action in reserving the right of disposal may be effective to inhibit the passing of property; see R. Bradgate [1988] JBL 477.

391  Clough Mill Ltd. v Martin [1985] 1 WLR 111.

392  An inappropriate way to describe a buyer in possession: E. Pfeiffer Weinkellerei-Weinenkauf GmbH v Arbuthnot Factors Ltd [1988] 1 WLR 150; Borden (UK) Ltd v Scottish Timber Products Ltd [1981] Ch. 25, 42 (Bridge LJ). Aliter Clough Mill Ltd v Martin [1985] 1 WLR 111, 116 (Robert Goff LJ); McCandless Aircraft LC v Payne [2010] EWHC 1835 (QB) at [9]‌.

393  Re Bond Worth Ltd [1980] Ch. 228.

394  [1991] 1 AC 56, overruling Church of England Building Soc. v Piskor [1954] Ch. 533. See R. Gregory (1990) 106 LQR 551. But Re Bond Worth Ltd [1980] Ch. 228 was said to survive Abbey National Building Soc. v Cann in Stroud Architectural Systems Ltd v John Laing Construction Ltd [1994] BCC 18.

395  The bare legal title plus the equity of redemption.

396  [1980] Ch. 228.

397  It should avoid any reference to equitable or beneficial ownership.

398  [1991] AC 339.

399  The rule is that the creditor has the right to appropriate payment to a particular debt if the paying debtor does not do so: Cory Bros and Co. Ltd v Owners of the Turkish Steamship Mecca (The Mecca) [1897] AC 286. In building contracts, where progress payments are made for supplies, particular difficulties are presented when those payments are not allocated to particular supplies; see P4Ltd v United Integrated Solutions Plc [2006] EWHC 2640 (TCC).

400  Cf. the position of a mortgagee.

401  Clough Mill Ltd v Martin [1985] 1 WLR 111. But a buyer unable to recover surplus value might have a restitutionary right to the recovery of excessive sums paid: Robert Goff LJ.

402  Clough Mill Ltd v Martin [1985] 1 WLR 111. Robert Goff LJ attributes the seller’s duty to account to an implied term in the contract. But it is not easy to see why the implication of such a term should be necessary to give business efficacy to the contract or why it should apply only if the contract has not been terminated; see also N. E. Palmer (1993) 6 J of Cont. Law 175, 182–3.

403  Clough Mill Ltd v Martin [1985] 1 WLR 111 (Robert Goff LJ).

404  See Ch. 11, paras 11.82–11.83.

405  More likely administrator or liquidator bringing proceedings in the buyer’s name.

406  Transag Haulage Ltd v Leyland DAF Finance plc [1994] BCC 356.

407  See Forsyth International (UK) Ltd v Silver Shipping Co. Ltd (The Saetta) [1994] 1 WLR 1334, 1338, where it was common ground between the parties that the title retention clause of a supplier of bunker fuels was still good against a charterer purchasing the fuels, even though (semble) the fuels were mixed with bunker fuels already on board ship; Hachette UK Ltd v Borders (UK) Ltd [2009] EWHC 3487 (Ch).

408  Re CKE Engineering Ltd [2007] BCC 975, applying Indian Oil Corp Ltd v Greenstone Shipping SA (Panama) (The Ypatianna) [1988] 1 QB 345 and Glencore International AG v Metro Trading International (No 2) [2000] EWHC 199 (Comm); [2001] CLC 1732 in reaching the conclusion that the seller’s share should be measured in accordance with the quality of its contribution to the mass as well as the quantity.

409  [1984] 2 All ER 152.

410  Chaigley Farms Ltd v Crawford, Kaye & Grayshire Ltd [1996] BCC 957.

411  Re Bond Worth Ltd [1980] Ch. 228.

412  Re Peachdart Ltd [1984] Ch. 131. The leather was said to lose its identity when by a process of cutting it was appropriated to the manufacturing process so as to lose its identity as leather, but this was expressed as a matter of party intention rather than as the rule of property law that it should be: Re Peachdart, 142.

413  ICI New Zealand Ltd v Agnew [1998] NZLR 129, 135 (even though the process can be reversed so as to recover the plastic pellets).

414  Borden (UK) Ltd v Scottish Timber Products Ltd [1981] Ch. 25.

415  Pongakawa Sawmill Ltd v New Zealand Forest Products Ltd [1992] 3 NZLR 304.

416  Re CKE Engineering Ltd [2007] BCC 975. See also Coleman v Harvey [1989] 1 NZLR 723; Associated Alloys Pty Ltd v Metropolitan Engineering and Fabrications Pty Ltd (1996) 20 ACSR 205, 209.

417  Modelboard Ltd v Outer Box Ltd [1992] BCC 945.

418  [1976] 1 WLR 676.

419  See Re Diplock [1948] Ch. 465; Chase Manhattan Bank NA v Israel-British Bank Ltd [1981] Ch. 105; Bank of America v Arnell [1999] Lloyd’s Rep Bank. 399.

420  [1976] 1 WLR 676, 690.

421  Re Bond Worth Ltd [1980] Ch. 228 (‘of crucial importance’).

422  Hendy Lennox (Industrial Engines) Ltd v Grahame Puttick Ltd [1981] 1 WLR 485, referring to Boardman v Phipps [1967] AC 46, 127 (Lord Upjohn) and Re Coomber [1911] 1 Ch. 723; see also L. Sealy [1962] CLJ 69.

423  Re Andrabell Ltd [1984] 3 All ER 407; see also E. Pfeiffer Weinkellerei-Weinenkauf GmbH v Arbuthnot Factors Ltd [1988] 1 WLR 150. On the difficulty of establishing a fiduciary relationship in an ordinary sale contract see Re Goldcorp Exchange Ltd [1995] 1 AC 74; Compaq Computer Ltd v Abercorn Group Ltd [1991] BCC 484.

424  [1981] Ch. 25.

425  Following South Australian Insurance Co. v Randell (1869) LR 3 PC 101. But Bridge LJ does contemplate a bailment arising in respect of unused resin: [1981] Ch. 25, 35.

426  Borden (UK) Ltd v Scottish Timber Products Ltd [1981] Ch. 25, 38 (Bridge LJ).

427  Borden (UK) Ltd v Scottish Timber Products Ltd [1981] Ch. 25, 42 (Bridge LJ); see also Templeman LJ, at 43.

428  The illustration given in Re Hallett’s Estate (1880) 13 Ch. D 696, 711 and discussed in Borden (UK) Ltd v Scottish Timber Products Ltd [1981] Ch. 25, 40–1 (Bridge LJ).

429  Banque Belge pour l’Etranger v Hambrouck [1921] 1 KB 321; Agip (Africa) Ltd v Jackson [1991] Ch 547.

430  Foskett v McKeown [2001] 1 AC 102, 128.

431  Foskett v McKeown [2001] 1 AC 102, 128–9 (Lord Millett); Trustees of the Property of FC Jones & Son v Jones [1997] Ch. 159, 171–2 (Millett LJ).

432  Compaq Computer Ltd v Abercorn Group Ltd [1991] BCC 484, 493.

433  Agnew v Commissioner of Inland Revenue [2001] 2 AC 710, 725.

434  [1991] BCC 484, 496.

435  [1985] 1 WLR 111. See also Glencore International AG v Metro Trading International (No. 2) [2000] EWHC 199 (Comm) at [156]; [2001] CLC 1732; Bacardi-Martini Beverages Ltd v Thomas Hardy Packaging Ltd [2002] 1 Lloyd’s Rep 62.

436  As well as in cases of commingling.

437  [1981] Ch. 25, 46.

438  See also Re Peachdart Ltd [1984] Ch. 131 (where the parties, supplier of leather and manufacturer of handbags, ‘must have intended’ a charge); Specialist Plant Services Ltd v Braithwaite [1987] BCLC 1; Ian Chisholm Textiles Ltd v Griffiths [1994] BCC 96.

439  Clough Mill Ltd v Martin [1985] 1 WLR 111 (Robert Goff LJ).

440  Tatung (UK) Ltd v Galex Telesure Ltd (1989) 5 BCC 325, 334–5 (Phillips J) (a case on the money proceeds of original goods).

441  ICI New Zealand Ltd v Agnew [1998] 2 NZLR 129, 135–6. In addition, the clause only vested in the seller such quantities of manufactured goods as equated to the current level of indebtedness, which therefore called for a continuing process of separation and identification and thus pointed to a charge: at 135.

442  No appreciable difference exists in the treatment of clauses concerning the money proceeds of original goods and clauses concerning the money proceeds of new goods, except that if the seller’s rights in new goods are considered to arise by way of charge, then it follows that any rights in the proceeds of new goods also arise by way of charge: Tatung (UK) Ltd v Galex Telesure Ltd (1989) 5 BCC 325, 332.

443  [1976] 1 WLR 676.

444  Discussed at paras 3.88–3.90.

445  ‘[It] is almost inevitable...that where the contract seeks to confer upon the seller a right to look for satisfaction of the price to property which is worth more than that amount (or to a sum of money which exceeds the price which is owed), the courts will construe the transaction as one involving a charge’: L. S. Sealy and R. J. A. Hooley, Text and Materials in Commercial Law (4th edn, OUP, 2008), 461.

446  Cf. the more lenient attitude of the courts in other areas of the law relating to charges: Welsh Development Agency v Export Finance Co. Ltd [1992] BCLC 48, with which contrast Curtain Dream plc v Churchill Merchanting Ltd [1990] BCC 341.

447  Hendy Lennox (Industrial Engines) Ltd v Grahame Puttick Ltd [1984] 2 All ER 152; Re Andrabell Ltd [1984] 3 All ER 407.

448  Tatung (UK) Ltd v Galex Telesure Ltd (1989) 5 BCC 325; Compaq Computer Ltd v Abercorn Group Ltd [1991] BCC 484.

449  Re Andrabell Ltd [1984] 3 All ER 407; Pfeiffer Weinkellerei-Weinenkauf GmbH v Arbuthnot Factors Ltd [1988] 1 WLR 150. Cf. Associated Alloys v CAN 001 452 106 Pty Ltd (2000) 202 CLR 568, where the Australian High Court recognized in its own terms a clause, consistent with the doctrine of certainty in the law of trusts, that the buyer held on trust for the seller such portion of the resale price of the goods as corresponded to the buyer’s indebtedness to the seller under the contract of sale. This decision is not likely to be followed in English cases, though its logic is hard to fault.

450  E. Pfeiffer Weinkellerei-Weinenkauf GmbH v Arbuthnot Factors Ltd [1988] 1 WLR 150.

451  Re Andrabell Ltd [1984] 3 All ER 407.

452  Inserted by the Enterprise Act 2002, s. 248 and Sch.16.

453  Or a combination of floating and fixed charges.

454  Insolvency Act 1986, ss. 230 et seq. (powers of office-holders).

455  Insolvency Act 1986, Sch.1.

456  But see how such a power might indirectly arise if the administrative receiver gave the necessary undertakings to reservation of title creditors: Lipe Ltd v Leyland Daf Ltd [1993] BCC 385 (cf. UCA France Champignon v Fisher Foods Ltd [2002] EWHC 1906 (QB); [2003] BPIR 299).

457  The current provisions are now in Sch. B1 to the Insolvency Act.

458  Sch. B1, para. 3, as added by the Enterprise Act 2002.

459  Insolvency Act 1986, ss. 72A–H (as added by the Enterprise Act 2002, s. 250).

460  Para. 43(3). See Fashoff (UK) Ltd v Linton [2008] EWHC 537 (Ch); [2008] BCC 542.

461  Para. 111(1).

462  Para. 44. For similar temporary powers that arise in favour of the directors of certain types of company when they propose a voluntary arrangement, see Insolvency Act 1986 (as amended by the Insolvency Act 2000), Sch. A1.

463  Para. 72. See Hachette UK Ltd v Borders (UK) Ltd [2009] EWHC 3487 (Ch).