The Gazette 1976

JUNE/JULY 1976

in the conditions used by the Dutch company. Secondly, any seller of goods who includes such a condition and who does not receive payment, will, apparently, have a good cause of action based upon a claim on the goods supplied. Thus, the supplier can rank in priority to a debenture holder and, in effect, has a first fixed charge over the goods and also a charge over the pro- ceeds of sale of the balance of the goods, if some have already been sold on. The latter means that a Bank who would normally be prepared to advance finance on the security of the goods in question will no longer be able to do so as the security might be subject to a prior charge in favour of the supplier. Further, the value of a floating charge must seriously be diminished and the consequences of the case may go so far as to affect accounting prin- ciples when valuing the worth of a company. This latter point is of particular significance when one remembers that the right of action which a sup- plier might have refers not only to monies due for the goods in question but also for any other monies which might be due to it from the buyer. The Irish case, to be summarised at page 17 of Irish cases, was decided on rather different grounds. The matter in this instance was a rather com- plicated one whereby a German company supplied goods to an Irish company which was associated with Interview Limited. As in the Romalpa case, there was a provision in the conditions of sale to the effect that the supplier remained the owner of the goods although possession had passed to the purchaser. Due to the fact that the contract was subject to Ger- man law, the Irish courts were prepared to accept the effect of this clause, but the argument was put forward that the importing company which was associated with Interview Limited had sold the goods on to Interview Limited and thus Interview Limited could avail of Section 25 of the Sale of Goods Act to be considered hereafter. In essence, this meant that the person to whom goods are transferred will get good title to them if the original buyer acted in the ordinary course of business as a mercantile agent. The latter phrase is rather con- fusing but probably means that the sale must have taken place at a business premises and during business hours. Kenny J. held that the Irish importing company could not have transferred the property in the goods delivered by the German companies because they them- selves never had it. Consequently, Interview Limited was unable to rely on the Sale of Goods Act because they did not receive the goods in good faith and they had notice of the rights of the original sellers contained in their con- ditions of sale. It was further held that due to the application of the conditions of sale, the goods were merely in the possession of Interview Limited and, as they were not owners of them, the debenture holder was not entitled to rank in priority to the German suppliers who were owed money for the goods. Further, had the receiver sold the goods, then the amount real- ised by the sale would in effect rank prior to the claim of the debenture holder. The effect of this case, although complicated by the existence of the Irish importing company, seems similar to that of the Romalpa case and, this being so, it may be that a considerable change in interpretation and application of the law in this area is under way.

Ownership of Goods belongs legally to Vendors although in physical possession of purchasers In the early part of 1975 two very important decisions were made quite independently by English and Irish courts which have had a considerable effect and, assuming that the cases are followed at a later date, may cause a radical change in one particular aspect of the law as it now stands. The two cases in question are commonly known as the Romalpa case (the English case) and the Inter- view case (the Irish case). Dealing first with the former, the facts of the case were as follows: Between 1971 and 1973, the English importers, who were a partner- ship, obtained from the plaintiffs, a Dutch company, supplies of aluminium foil under agreed terms of sale. On 1 September 1973, the defendants, a limited com- pany, took over the partnership. Although two of the partners became controlling directors the company got into financial difficulties, and a receiver was appointed. The plaintiffs sought declarations that aluminium foil in defendant's possession valued at over £50,000 was their property, and that the proceeds of subsales of aluminium by the defendants held by the receiver amounting to £35,000 was held in trust for them. Mocatta J. held that the terms of sale did apply. Ac- cordingly a term must be implied that the material sold by the defendants was sold on the account of the plain- tiffs. In view of Hallett's Estate (1880) 13 Ch. 6, the plaintiffs were entitled to trace the proceeds of the subsales. A Dutch supplier brought an action against an English company which had had a receiver appoint- ed to it. The supplier was claiming for the return of the goods which the receiver had in his possession and, more importantly, for the amount of the proceeds of sale by the English company of the balance of the goods in question. In the sale contract there was a clause stating that the title in the goods (aluminium foil) did not pass to the English company until such time as any debt due to the supplier by the English defendant company had been discharged. The debt included any sum which might not be directly connected with the present transaction. The question of paramount importance was "Did the term in the contract give the Dutch supplier the right to claim not only the goods which were in the possession of the receiver but also the proceeds of sale from that portion of the goods previously s o l d?" The Court held in favour of the Dutch company. The defendants appealed unsuccessfully to the Court of Appeal (Megaw, Roskill and Goff L.J J.). The Court held that the crucial facts were that the defendants were selling goods which the plaintiffs owned, and the relevant clause was designed to protect the plaintiffs against non-payment by the defendants. The defendants were selling goods as agents for the plaintiffs and so stood in a fiduciary capacity. Accordingly Hailett's Estate (1880) applied. Appeal heard on Í6 January 1976 (Solicitors Journal, p. 95). The consequences of this case are clearly of con- siderable significance. First, it will undoubtedly be- come common practice for suppliers to include in their conditions of sale a similar provision to that contained

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