Gamer's Motor Centre (Newcastle) Pty Ltd v Natwest Wholesale Australia Pty Ltd

The dealer had earlier entered into a floor plan agreement called "Used Vehicle Bailment Agreement (Dealers Stock)" ("the Agreement") with the respondent ("Natwest"), formerly known as Lombank Finance Pty. Ltd., for the purpose of financing the acquisition of stock. This Agreement dated 17 November 1978 made provision for the purchase by Natwest of used motor vehicles acquired by the dealer as stock on the footing that it would retain possession of such a vehicle as bailee for Natwest (cl. 8) pending sale of the vehicle in the course of the Dealer's retail business or earlier termination of the bailment in accordance with the provisions of the Agreement. Natwest agreed to pay 90 per cent of the agreed purchase price of a vehicle on completion of the sale to Natwest and the balance when the vehicle was disposed of by the dealer: cl. 2. The dealer warranted that each vehicle sold to Natwest would be his own unencumbered property (cl. 3) and that he would indemnify Natwest against any loss arising from defective title: cl. 6.

Subject to the limitations contained in Clause 5 I will seek to obtain but not as agent for Lombank offers to purchase the unit or offers addressed to Lombard to take the unit under hire purchase and I shall advise Lombank from time to time of receipt by me of any such offer. Lombank may then in its entire discretion sell the unit to me but shall be under no obligation to do so and pending any such sale I shall have no interest in or option over the unit which shall remain at all times the property of Lombank and I shall have no right or authority to sell dispose of or part with possession or custody of the unit or create or authorise the creation of any lien thereon.

The dealer completed and signed in respect of each of the eight vehicles a document headed "Lombank Finance Pty. Ltd. Delivery Receipt for Trade-in or Used Vehicles" and sent them to Natwest. Although seven of the receipts are dated 13 July 1979, it is possible that they were not given to Natwest until 16 July 1979, as that is the date stamped on the documents indicating when the cheque was drawn by Natwest. Each of the documents describes the relevant vehicle, states the purchase price, indicates that it was purchased from Gamer, and acknowledges that the dealer takes delivery of the vehicle in the terms of the Agreement. Natwest drew two cheques in favour of the dealer, amounting together to 90 per cent of the agreed purchase price of the eight vehicles. The proceeds of the cheques were credited to the dealer's bank account. As Gamer had not received payment for the vehicles, it seized them later in the month of July 1979.

Natwest sued Gamer in the District Court in detinue and conversion, seeking the return of the vehicles and alternatively, their value, amounting to $26,100. Judge Herron held that on the evidence Gamer authorized the dealer to sell the vehicles and pass title to them before Gamer was paid and that this authorization constituted a variation of the printed condition on the invoice which I have quoted. These findings led to the conclusion that the dealer passed title in the vehicles to Natwest and that the bailment between Natwest and the dealer under the Agreement was effective. Accordingly, his Honour did not need to decide whether s. 28(2) of the Act applied. His Honour gave judgment for Natwest in the sum of $26,100 with interest on that amount at the rate of 12.5 per cent per annum from 14 May 1981. An appeal by Gamer to the New South Wales Court of Appeal (Priestley and McHugh JJ.A., with Kirby P. dissenting) was dismissed. The Court held unanimously that there was no variation of the conditions on the invoice. The correctness of this conclusion is no longer in issue. Priestley and McHugh JJ.A., Kirby P. contra, went on to hold that the reference in s. 28(2) of the Act to delivery included constructive delivery as well as physical delivery and that there was a constructive delivery by the dealer to Natwest of the vehicles with the consequence that title passed to Natwest.

In its appeal to this Court Gamer contends that the reference in s. 28(2) is confined to physical delivery and that, even if it extends to constructive delivery, no such delivery was established on the evidence.

Where a person having bought or agreed to buy goods obtains with the consent of the seller possession of the goods or the documents of title to the goods, the delivery or transfer by that person or by a mercantile agent acting for him of the goods or documents of title under any sale pledge or other disposition thereof to any person receiving the same in good faith and without notice of any lien or other right of the original seller in respect of the goods shall have the same effect as if the person making the delivery or transfer were a mercantile agent intrusted by the owner with the goods or documents of title.

The sub-section needs to be read with its companion provision: s. 28(1). The two provisions are statutory exceptions to the general rule enunciated in s. 26(1) that a sale of goods by a person who is not the owner and who sells without the authority or consent of the owner confers no better title than the seller has, unless the owner is by his conduct precluded from denying the seller's authority to sell. Although there are differences between s. 28(1) and (2), these differences are not material to the outcome of the present case.

Section 28(2) also needs to be read with s. 5(1) of the Factors (Mercantile Agents) Act 1923 NSW which provides that a sale, pledge or other disposition of goods in the ordinary course of business of a mercantile agent, by a mercantile agent entrusted with the possession of goods is, subject to that Act, as valid as if he were expressly authorized by the owner to make the sale, pledge or other disposition. The effect of s. 28(2) is, if its requirements are satisfied, to validate the delivery or transfer and not the sale, pledge or other disposition: see Cahn v. Pockett's Bristol Channel Steam Packet Co. [1] ; City Fur Manufacturing Co. Ltd. v. Fureenbond Ltd. [2] .

1. [1899] 1 Q.B. 643. 2. [1937] 1 All E.R. 799.

Although the last clause in s. 28(2) makes no reference to a sale, pledge or other disposition by a mercantile agent in the ordinary course of his business, it has been considered in Australia and New Zealand that, if the conditions stated in the sub-section are satisfied, the delivery of the goods is to have the same effect as if the sale of the goods had been legally effected by a mercantile agent, i.e., as if it had been in the ordinary course of his business: Langmead v. Thyer Rubber Co. Ltd. [3] ; Jeffcott v. Andrew Motors Ltd. [4] . It can scarcely be suggested that the sub-section was intended to provide that a buyer in possession could confer a good title only in cases where his disposition was in the ordinary course of his business as a mercantile agent: Dean, Law Relating to Hire-Purchase Law in Australia, 2nd ed. (1938), pp. 54-55; Else-Mitchell & Parsons, Hire-Purchase Law, 4th ed. (1968), pp. 211-212. On the other hand in Newtons of Wembley Ltd. v. Williams [5] , Pearson L.J. and Sellers L.J. [6] considered that the effect of the section is to validate a transaction if the buyer does something which would amount to acting in the ordinary course of business if he were a mercantile agent. Although it is unnecessary to make a choice between these competing opinions for the purpose of deciding the present case, there is some force in the view that the last clause of s. 28(2) speaks to a situation in which the assumption is made that a mercantile agent entrusted by the owner with the goods or documents of title sells, pledges or otherwise disposes of them in the ordinary course of his business: see the discussion in Atiyah, Sale of Goods, 7th ed. (1985), pp. 301-302.

1. [1947] S.A.S.R. 29, at p. 39. 2. [1960] N.Z.L.R. 721, at p. 729. 3. [1965] 1 Q.B. 560, at pp. 577-580. 4. [1965] 1 Q.B., at pp. 574-575.

The word "delivery" is defined in s. 5(1) of the Act to mean, unless the context or subject-matter otherwise requires, "voluntary transfer of possession from one person to another". This is the legal meaning of "delivery" and it differs from the popular meaning of the word which, as Professor Atiyah points out (p. 71) is the dispatch of goods. The word "possession" is not defined by the Act, though s. 6(3) of the Factors (Mercantile Agents) Act provides that, for the purposes of that Act:

an agent shall be deemed to be possessed of goods or documents of title to goods whether the same are in his actual custody or control or are held by any other person subject to his control or for him or on his behalf.

Gamer submits that the word "possession" should be given its common or ordinary meaning. This, according to the argument, is actual physical custody. The argument, if accepted, entails the consequence that delivery must be actual. Whether the popular understanding of "possession" confines it to actual custody is open to doubt. But this question may be put to one side as "possession" is an established legal concept, particularly in its application to goods and chattels.

It is a well-settled rule of construction that in the case of a statute being a code intended to replace the common law, its meaning is to be ascertained in the first instance from its language and the natural meaning of that language is not to be qualified by considerations derived from the antecedent law: Brennan v. The King [7] ;Bank of England v. Vagliano Brothers [8] . But an appeal to earlier decisions can be justified if the language of the statute is itself doubtful or if some other special ground is made out, e.g., if words used have previously acquired a special meaning which differs from their ordinary meaning: Sungravure Pty. Ltd. v. Middle East Airlines Airliban S.A.L. [9] .

1. (1936) 55 C.L.R. 253, at p. 263. 2. [1891] A.C. 107, at pp. 144-145. 3. (1975) 134 C.L.R. 1, at p. 22.

Here, as I have said, the word "delivery" is defined in terms of its legal meaning. There is therefore a strong foundation for the conclusion that the statutory definition of "delivery" referred to "possession", not in its popular sense or as meaning actual custody, but in its legal or technical sense. Indeed, the seller's obligation under s. 30 of the Act cannot always be sensibly discharged by actual delivery. A commodity or chattel incapable of actual physical delivery, except perhaps at great inconvenience and cost, such as a yacht (see Bank of New South Wales v. Palmer [10] ), must be capable of constructive or symbolic delivery falling short of actual delivery. And there is no suggestion in s. 30 that "deliver" is used otherwise than in its defined sense. Section 32(3) of the Act expressly recognizes constructive delivery by attornment. The sub-section provides:

Where the goods at the time of sale are in the possession of a third person, there is no delivery by seller to buyer unless and until the third person acknowledges to the buyer that he holds the goods on his behalf The sub-section is not expressed in such a way as to indicate that it was intended to make provision for delivery otherwise than in the defined sense of the term. The point of s. 32(3) was to negate the existence of a delivery unless in the situation described there was an acknowledgment by the third person to the buyer. 1. [1970] 2 N.S.W.R. 532; 91 W.N. (N.S.W.) 580.

It is significant that Sir Mackenzie Chalmers, in his Commentary on the original Sale of Goods Bill 1888 treated the reference in the statutory definition to "possession" as a reflection of the antecedent common law. He drew attention to those features of the Bill which were departures from the common law and did not suggest that the statutory definition of "delivery" constituted such a departure.

In his Sale of Goods Act, 1893, 5th ed. (1902) which was substantially a reproduction of his Commentary, he said (p. 118) of the statutory definition of "delivery", which was the same as that contained in s. 5 of the New South Wales Act:

Delivery may be actual or constructive. Delivery is constructive when it is effected without any change in the actual possession of the thing delivered, as in the case of delivery by attornment or symbolic delivery. Delivery by attornment may take place in three classes of cases. First, the seller may be in possession of the goods, but after sale he may attorn to the buyer, and continue to hold the goods as his bailee. Secondly, the goods may be in the possession of the buyer before sale, but after sale he may hold them on his own account. Thirdly, the goods may be in the possession of a third person, as bailee for the seller. After sale such third person may attorn to the buyer and continue to hold them as his bailee. The third class of case is now dealt with in s. 32(3).

Sir Mackenzie Chalmers also drew attention to Sir Frederick Pollock's definition of "delivery" as "voluntary dispossession in favour of another" and later went on to refer to that author's discussion of "symbolic delivery" by giving the buyer the key of the place where the goods are stored, accepting the view that the key is not the symbol of the goods, but that the transaction "consists in such a transfer of control in fact as the nature of the case admits, and as will practically suffice for causing the new possessor to be recognized as such": Pollock & Wright, Possession in the Common Law (1888), p. 61. See Dublin City Distillery Ltd. v. Doherty [11] ; Wrightson v. McArthur and Hutchisons [12] .

1. [1914] A.C. 823, at pp. 843 et seq., 852. 2. [1921] 2 K.B. 807, at pp. 816-817.

The importance of these comments is that, though made with reference to the concept of "delivery" as defined by the statute, they none the less reflected the tenor of the antecedent judicial decisions on the common law, the statute being a codification of the common law. Each of the three examples of constructive delivery by attornment given in the passage which I have quoted was an illustration taken from the earlier common law. Lindley L.J. expressed the general principle in Mills v. Charlesworth [13] in this way:

In point of law possession of goods may be changed by agreement without any physical change in their position or in the position of the person who actually guards them. The right to possession may be transferred by agreement, and the character in which the custodian holds them may be changed by attornment. 1. (1890) 25 Q.B.D. 421, at p. 425.

This principle was the foundation of the decisions on s. 17 of the Statute of Frauds 1677 (now s. 9 of the Sale of Goods Act) whereby a contract for the sale of goods of ten pounds or more was not enforceable "unless the buyer shall accept part of the goods so sold and actually receive the same". The courts equated actual receipt with delivery, holding that there may be a change of possession without any change of actual custody, such a change of possession being described as constructive delivery: Pollock and Wright, p. 57. So, in Elmore v. Stone [14] , Mansfield C.J. held that two horses sold by the seller to the buyer came into the possession of the buyer for the purpose of s. 17 of the Statute of Frauds on the seller acknowledging that he held them for the buyer as livery stable keeper and not as seller. The decision was applied in Marvin v. Wallis [15] ; and accepted by Lord Atkinson in Dublin City Distillery [16] as having been correctly decided, notwithstanding the suggestion that it was overruled in Proctor v. Jones [17] .

1. (1809) 1 Taunt. 458 [127 E.R. 912]. 2. (1856) 6 El. & Bl. 726 [119 E.R. 1035]. 3. [1914] A.C., at p. 844. 4. (1826) 2 Car. & P. 532 [172 E.R. 241].

Lord Parker in Dublin City Distillery [18] , speaking of pledges, said:

There are cases in which possession may pass to the pledgee without actual delivery, e.g., whenever there is some agreement between the parties the effect of which is to change the possession of the pledger from a possession on his own account as owner into a possession as bailee for the pledgee: see Meyerstein v. Barber [19] . And his Lordship went on to say that where the goods were in the possession of a third party the pledger usually gave a direction to the third party requiring him to deliver or to hold the goods for the pledgee, followed either by actual delivery to the pledgee or by an acknowledgment by the third party that he holds for the pledgee: see also Official Assignee of Madras v. Mercantile Bank of India Ltd. [20] . 1. [1914] A.C., at p. 852. 2. (1866) L.R. 2 C.P. 38. 3. [1935] A.C. 53, at pp. 58-59.

Gamer contests the relevance of the decisions on s. 17 of the Statute of Frauds on the ground that the courts were there concerned with the interpretation of the words "actually receive the goods" and not with the words "delivery" or "possession". The response to this argument is that a central element in the reasoning in the decisions was the concept of delivery and change of possession expressed in the broad principle stated by Lindley L.J. in Mills v. Charlesworth [21] .

This principle was accepted by this Court inMinister for Supply & Development v. Servicemen's Co-operative Joinery Manufacturers Ltd. [22] , a decision on the Sale of Goods Act 1895 SA, which was not referred to in argument in this Court or in the courts below. Williams J. observed [23] :

It is well established that constructive delivery sufficient to pass the title in chattels may be effected by a change in the character of an uninterrupted custody. For this proposition his Honour cited Elmore v. Stone [24] ; Marvin v. Wallis [25] ; Dublin City Distillery [26] ; and Akron Tyre Co. Pty. Ltd. v. Kittson [27] . Webb J. [28] agreed with Williams J. on this point, but considered [29] that the evidence did not establish a case of constructive delivery. Latham C.J. also thought that there could be constructive delivery under the Act. His Honour said [30] : The fact that the buyer was in possession as a bailee has no significance in relation to delivery under the subsequent contract of sale. There could be a delivery under that contract only if there was a change in the character of the possession - i.e., from possession as bailee to possession in pursuance of the contract of sale: Pollock and Wright, Possession in the Common Law (1888), pp. 57, 74, 75. In Akron Tyre Co. Pty. Ltd. v. Kittson [31] , the joint judgment of Williams and Kitto JJ. states the proposition which I have quoted from the judgment of Williams J. in Minister for Supply and Development . These statements in this Court, like those in Dublin City Distillery, indicate that the Sale of Goods Act contemplates constructive delivery just as the common law did. 1. (1951) 82 C.L.R. 621. 2. (1951) 82 C.L.R., at p. 641. 3. (1809) 1 Taunt. 458 [127 E.R. 912]. 4. (1856) 6 El. & Bl. 726 [119 E.R. 1035]. 5. [1914] A.C. 823. 6. (1951) 82 C.L.R. 477. 7. (1951) 82 C.L.R., at p. 643. 8. (1951) 82 C.L.R., at p. 644. 9. (1951) 82 C.L.R., at p. 635. 10. (1951) 82 C.L.R., at p. 494.

However, Gamer submits that in the context of s. 28(2) "delivery" bears a more confined meaning. This is because one aspect of the doctrine of constructive possession includes the notion of a change in the right to possession and because the assumption which the sub-section predicates is that the buyer in possession of the goods or documents of title, having no property in the goods, cannot pass title to them, except through the operation of the sub-section. It is said that this demands that the reference to "delivery" be read as a reference to actual delivery. I would reject this argument on the ground that s. 28(2) makes provision for the buyer in possession to pass property in the goods as if the person making the delivery were a mercantile agent entrusted by the owner with the goods or the documents of title. This it does by validating the delivery, notwithstanding the absence of title in buyer in possession. In other words, the effect of the sub-section is to give validity to a delivery which would, but for absence of title in the person making it, be an effective delivery.

Gamer also relies on the interpretation given by the Judicial Committee in Pacific Motor Auctions Pty. Ltd. v. Motor Credits (Hire Finance) Ltd. [32] , to possession in s. 28(1) of the Act. In a passage quoted with approval by Barwick C.J. in Mercantile Credits Ltd. v. F. C. Upton & Sons Pty. Ltd. [33] , Lord Pearce speaking for the Judicial Committee said [34] :

The heredity of the section which their Lordships are now considering can therefore be summed up as follows. Its words are identical with those of s. 8 of the Factors Act 1889 where they first appeared in this exact form. In that Act it was expressly deemed that "actual custody" should constitute possession. In the Sale of Goods Act 1893, s. 25, the same form of words was again enacted. Part of that section (namely, s. 25(2)) contains an implicit reference and part of it (namely, s. 25(3)) an explicit reference to the Factors Acts. There was strong authority for saying that in part of the section (namely, s. 25(2)) "actual custody" constitutes possession. It had never been suggested by 1923, when the same form of words was first enacted in New South Wales, that there could be written into another part of s. 25 (namely, s. 25(1)) an implied proviso that actual custody should not constitute possession if the possession though continuous became attributable to a bailment - thus giving to possession a meaning different from that which it had under the rest of the section and different from that which it had under a previous and co-existing section in identical terms: Factors Act 1889, s. 8. Earlier his Lordship had observed [35] : The object of the section is to protect an innocent purchaser who is deceived by the vendor's physical possession of goods or documents and who is inevitably unaware of legal rights which fetter the apparent power to dispose. 1. (1965) 112 C.L.R. 192; [1965] A.C. 867. 2. (1974) 48 A.L.J.R. 301, at p. 302. 3. (1965) 112 C.L.R., at p. 204; [1965] A.C., at p. 888. 4. (1965) 112 C.L.R., at p. 202; [1965] A.C., at p. 886.

The "strong authority" for saying that the reference in s. 28(2) to "possession" is to actual custody is found in Hugill v. Masker [36] , per Lord Esher M.R., and more particularly in Cahn [37] , per Collins L.J. And it must be accepted, in accordance with what was said in Pacific Motor Auctions that "possession" has the same meaning in s. 28(1) and (2). But this does not mean that the meaning which the word has in the context in which it appears at the commencement of the two sub-sections is the meaning which it bears when it appears in the statutory definition of "delivery". The point is that the object of s. 28, the protection of innocent third parties dealing with a seller or buyer in possession of goods or the documents of title thereto and therefore appearing to be the owner of the goods, as well as the legislative history of the provisions, requires that "possession" be construed in a particular way. These considerations have no application at all to the statutory definition of "delivery" which is designed to identify or describe the act which passes title to goods as between seller and buyer.

1. (1889) 22 Q.B.D. 364, at p. 370. 2. [1899] 1 Q.B., at p. 658.

Indeed, to treat "delivery" as embracing constructive delivery is to enhance the protection given by s. 28(2) to the innocent purchaser. There is no valid reason why his title should depend upon actual, as distinct from constructive, delivery. The mischief aimed at is a sale by a buyer in possession of goods or documents of title who is not the owner of them, the object being to protect the sub-buyer who is deceived by the appearance of ownership arising from possession. There is no point in confining the protection to the sub-buyer who takes under an actual delivery. Once this is appreciated, the history of s. 28(1) and (2), which can be traced through the Factors Acts, beginning with the English Act of 1823, ceases to have any importance. That history shows that the protection afforded to the innocent buyer was gradually extended, but it throws no light on the question now under consideration.

Gamer then relies on authority not binding on this Court. Nicholson v. Harper [38] , as McHugh J.A. pointed out, does not decide that s. 28 contemplates actual delivery. It decides no more than that there must be a delivery or transfer in addition to the sale [39] . In Bank of New South Wales v. Palmer [40] , Helsham J. concluded that delivery in s. 28 is restricted to a "change in physical possession of goods or title deeds", his view being applied by O'Regan J. in N.Z. Securities & Finance Ltd. v. Wrightcars Ltd. [41] . I do not consider that his Honour's conclusion is supported by the reason assigned for it, namely that the section neither refers to property in goods the subject of the transfer, nor to any transaction which is ordinarily accompanied only by a transfer of property in goods rather than the goods themselves. This reason supports no more than the limited conclusion reached in Nicholson v. Harper that there must be a delivery apart from the sale, pledge or other disposition. So long as this requirement is satisfied, a constructive delivery is a delivery within the statutory definition and within the meaning of s. 28(2). Thus, each of the three classes of constructive delivery by attornment instanced by Sir Mackenzie Chalmers would satisfy the statutory definition.

1. [1895] 2 Ch. 415. 2. [1895] 2 Ch., at p. 418. 3. [1970] 2 N.S.W.R. 532, at p. 536; 91 W.N. (N.S.W.) 580, at p. 584. 4. [1976] 1 N.Z.L.R. 77.

But cases of constructive delivery are not confined to these three examples, as the statements dealing with a change in the character of possession, previously quoted, so clearly indicate. The question then is whether on the evidence there was a change in the character of the dealer's possession of the vehicles which amounts to a constructive delivery to Natwest. The majority in the Court of Appeal held that the effect of the Agreement between Natwest and the dealer was that, on payment of 90 per cent of the purchase price, the dealer became the bailee of Natwest. This, in the opinion of their Honours, constituted a transfer of possession and was a delivery for the purpose of s. 28(2).

Despite the discrepancy in the dates of the Gamer invoices, the delivery receipts and the dates on which Natwest drew cheques in favour of the dealer, it seems that the dealer, having agreed to buy and having taken possession of the vehicles from Gamer, then delivered the receipts to Natwest against which cheques were subsequently drawn in favour of the dealer. That was the effect of the oral evidence given by the officers of Natwest and the dealer. The delivery receipt had a dual operation. When read with the Agreement, it evidenced the terms of the agreement for sale to Natwest, that agreement being made on delivery of the receipt, and acknowledged that the dealer held the vehicle for and on behalf of Natwest. And the receipt also operated as an acknowledgment that the dealer held the vehicle as bailee for Natwest pursuant to the Agreement. It may be that in this respect the operation of the receipt was conditional, not only upon Natwest's agreement to purchase the vehicles, but also upon Natwest's payment of 90 per cent of the agreed price.

However this may be, I see no difficulty in regarding the handing over of the delivery receipt as serving the dual purpose already mentioned, namely an acknowledgment that the dealer holds the vehicle to which it relates for Natwest pursuant to the agreement for sale contemporaneously made and as an acknowledgment that it holds, or will hold, as bailee pursuant to the Agreement. The receipt, though it evidences the terms of sale, is not itself the sale or the agreement for sale. The delivery of the receipt is something apart from the sale so that the constructive delivery which it evidences is something more than a mere change in the right to possession arising from the sale from the dealer to Natwest.

The plain purpose of s. 28 of the Sale of Goods Act 1923 NSW ("the Act") is to give a measure of protection to third parties to whom goods or the documents of title to goods are delivered or transferred under a sale, pledge or other disposition by a seller of the goods who has parted with his property in them or by a buyer of the goods who has not acquired property in them. Subsection (1) deals with the effect of delivery or transfer by such a seller to a third party; sub-s. (2) deals with the effect of delivery or transfer by such a buyer to a third party. (In passing, it may be noted that there is some difficulty in giving meaning to the words "bought or" in sub-s. (2), for the effectiveness of a delivery or transfer by a buyer who is the true owner and who delivers or transfers to a third party under a sale, pledge or other disposition needs no support from the sub-section unless, perhaps, the seller has retained a limited interest in the goods. It may be that the words are surplusage: see Atiyah, Sale of Goods, 7th ed. (1985), p. 294. In this case the protection of s. 28(2) is invoked by a third party (Natwest) in circumstances set out by the Chief Justice in his judgment. The question is whether Natwest acquired, by virtue of the operation of s. 28(2), a better title to eight motor vehicles seized by Gamer than the title which Gamer had.

Section 28 prescribes exceptions to the general rule that a person who has no title to goods cannot pass title to another though he delivers the goods to the other intending to pass title. The section requires that the person who makes the delivery and who has no title to pass to the other person is a seller who continues or is in possession of the goods or is a buyer who has obtained possession of the goods with the seller's consent. For the purpose of s. 28, a person is in possession of goods when he has the goods in his actual custody, the object of the section being "to protect an innocent purchaser who is deceived by the vendor's physical possession of goods or documents and who is inevitably unaware of legal rights which fetter the apparent power to dispose": Pacific Motor Auctions Pty. Ltd. v. Motor Credits (Hire Finance) Ltd. [42] .

1. (1965) 112 C.L.R. 192, at p. 202; [1965] A.C. 867, at p. 886.

Section 28 does not in terms validate the sale, pledge or other disposition under which a delivery of goods is made. It gives to a delivery under the relevant sale, pledge or other disposition the effect prescribed by the respective sub-sections. In the case of a delivery of goods falling within sub-s. (2), the delivery by a buyer to a third party under a sale by the buyer to the third party has "the same effect as if [the buyer] were a mercantile agent intrusted by the owner with the goods". Sub-section (3) identifies the hypothetical mercantile agent as one who has, in the customary course of his business as such agent, "authority either to sell goods, or to consign goods for the purpose of sale, or to buy goods, or to raise money on the security of goods".

Then it is necessary to go to s. 5 of the Factors (Mercantile Agents) Act 1923 NSW ("the Factors Act") to ascertain the effect of a sale, pledge or other disposition of goods made by a mercantile agent who is "entrusted as such with the possession of any goods or the documents of title to goods", to quote the text of that section. Section 5 provides that any such sale, etc., made by such a mercantile agent "in the ordinary course of business of a mercantile agent" is -

subject to the provisions of this Act as valid as if he were expressly authorised by the owner of the goods to make the same:

Provided that the person taking under the disposition acts in good faith, and has not at the time of the disposition notice that the person making the disposition has not authority to make the same.

I do not think that s. 28(2) is limited to cases where the sale, etc., is made by a buyer "in the ordinary course of business of a mercantile agent". The object of the sub-section is to protect innocent third parties dealing with any buyers without title, not only buyers who are mercantile agents. The operation of the sub-section depends on the hypothesis "as if the person making the delivery or transfer were a mercantile agent", so that the business of that person is hypothetically translated into the business of a mercantile agent. Therefore s. 28(2) attracts to a delivery or transfer in the ordinary course of business by that person the same effect as s. 5 of the Factors Act attributes to a transfer or delivery under a sale, pledge or disposition by a mercantile agent in the ordinary course of business as a mercantile agent. That was the view taken by Reed J. in Langmead v. Thyer Rubber Co. Ltd. [43] , and by Gresson P. and Cleary J. in Jeffcott v. Andrew Motors Ltd. [44] . If the buyer were in fact a mercantile agent, what work would s. 28(2) have to do that would not be done by s. 5 of the Factors Act? The effect of such a s. 28(2) delivery is therefore the effect which a delivery would have if the sale, etc., under which it was made had the validity attributed to a sale, etc., by that part of the text of s. 5(1) of the Factors Act which commences with the words "subject to " set out above. In other words, when there is no applicable qualification to be derived from other provisions of the Factors Act and when the proviso to s. 5(1) of the Factors Act does not apply, a delivery of goods falling within s. 28(2) has effect as though the buyer were delivering the goods under a sale, etc., which he had been expressly authorized by the owner of the goods to make. In the circumstances of the present case, if s. 28(2) applies, a delivery of the eight cars whose title is in question by Evans & Rose Motors Pty. Ltd., the dealer, to Natwest under a sale to Natwest, would have effect as though the sale had been made by the dealer with the express authority of Gamer. 1. [1947] S.A.S.R. 29, at p. 39. 2. [1960] N.Z.L.R. 721, at p. 729.

The Agreement between the dealer and Natwest related to used motor vehicles previously acquired by the dealer as stock: cl. 1(a). It provided that the property in a motor vehicle to be sold should pass to Natwest upon payment by Natwest to the dealer of 90 per cent of the agreed price: cl. 2. The dealer agreed "[t]o take on hire every used display unit provided hereunder and keep the same in my own possession as bailee for [Natwest] for display purposes only on my showroom floor". Section 28(2) does not operate directly on the Agreement as though it applied s. 5 of the Factors Act to the Agreement and deemed it to have been made with Gamer's express authority. If s. 28(2) operated in that way, the property in the motor vehicles would have been transferred to Natwest pursuant to cl. 2 of the Agreement at the time when the parties to the Agreement intended it to be transferred: s. 22(1). The property in the motor vehicles would have been transferred to Natwest, but not by reason of their delivery. Section 28(2) has a different operation. Clearly it is intended to confer on innocent third parties - sub-buyers, pledgees and disponees - who deal with the buyer in possession a measure of protection against the true owner, but the statutory protection is more than a mere right in the third party to retain possession as against the true owner. Section 28(2) and its statutory analogues have always been understood to be effective to enable the buyer mentioned therein who sub-sells to give not only possession but title to an innocent sub-buyer though the sub-seller has no title himself to give. In Cahn v. Pockett's Bristol Channel Steam Packet Co. [45] , a buyer who obtained possession of a bill of lading with the consent of the seller but who, not having paid for the goods, had no authority to deal with the bill of lading, transferred the bill of lading to an innocent sub-buyer for a price. It was held that the sub-buyer had acquired title and that the unpaid seller was not entitled to stop the goods in transit. Against this conclusion it was objected that the sub-sale had been made before the buyer (the sub-seller) got possession of the bill of lading, the point being presumably that the sub-sale could acquire no validity if the sub-seller did not have possession of the bill of lading at the time. Collins L.J. disposed of the objection [46] :

As to the point that there had been a bargain made by [the sub-seller] with [the sub-buyer] before the former got possession of the bill of lading, the answer is that [the sub-buyer's] title rests on the transfer of the bill of lading for cash, and not on the prior bargain. 1. [1899] 1 Q.B. 643. 2. [1899] 1 Q.B., at p. 665.

Section 28(2) thus operates on delivery or transfer and not on the antecedent sale, pledge or other disposition under which delivery or transfer is made. No property in the goods sold, pledged or disposed of passes unless and until delivery or transfer is made. The title then acquired arises from the delivery or transfer, and not solely from an antecedent contract. Of course, a sale or disposition of goods by an owner might require - it depends on the nature of the transaction - and a pledge of goods does require delivery of the goods to effect a passing of general or special property in them to the buyer, pledgee or disponee. But the property in goods need not, and frequently does not, pass on delivery under a contract of their sale. Although a sub-buyer whose title depends on a delivery of goods falling within s. 28(2) cannot rely solely on an antecedent contract for their sale as the source of his title, the title which the sub-buyer acquires on delivery can be no different from that which he would have had if the antecedent contract had been made with the owner's authority. (I omit as presently immaterial qualifications which might be imported from provisions of the Factors Act other than s. 5 or which might be required when the original seller had no title.) It is only by assimilating the title which is taken on delivery with the title which the third party would then have held if the contract had been made with the owner's authority that one can predicate of the delivery that it has the same effect as if it were made by a mercantile agent entrusted by the owner with the goods or documents of title.

In this case, had the dealer been the owner of the motor vehicles, the property in them would have passed to Natwest under the Agreement and in accordance with cl. 2, irrespective of delivery or the time when delivery was made. But Natwest, being unable to rely solely on the Agreement, must rely on a delivery which is capable of effecting a vesting of title to the motor vehicles in dispute.

The traditional mode of transferring property in personal chattels is by delivery of possession and that might be symbolic or constructive as well as actual: King v. Greig [47] ; Dublin City Distillery Ltd. v. Doherty [48] . Having regard to the purpose of s. 28(2), there seems to be no compelling reason why delivery of goods under the sub-section should not include symbolic or constructive delivery of possession, as well as actual delivery of possession. "It is well established", said Williams and Kitto JJ. in Akron Tyre Co. Pty. Ltd. v. Kittson [49] , "that constructive delivery sufficient to pass the title in chattels may be effected by a change in the character of an uninterrupted custody": see also Minister for Supply & Development v. Servicemen's Co-operative Joinery Manufacturers Ltd. [50] . The term "delivery" is defined by s. 5(1) of the Act to mean "voluntary transfer of possession from one person to another" unless the context or subject-matter otherwise requires, and there is no doubt that not only title but also legal possession of a personal chattel may be transferred as effectively by symbolic or constructive delivery as by actual delivery: Dublin City Distillery Ltd. v. Doherty [51] . Although Pacific Motor Auctions Pty. Ltd. v. Motor Credits (Hire Finance) Ltd. [52] establishes that the purpose of s. 28 is to protect an innocent purchaser who is deceived by the vendor's physical possession of the goods or documents of title and that the section operates when the buyer or seller without title is in actual possession of the goods or documents, it would be at odds with authority and commercial experience to attribute to the term "possession" in the definition of "delivery" the meaning of actual possession. It is a matter of daily occurrence that a seller performs his obligation to deliver the goods he sells by constructively giving delivery of possession to the buyer. One way in which goods are constructively delivered to a buyer is when the person having custody of them (whether as seller, bailee or otherwise) acknowledges that he holds the goods for the buyer: see Elmore v. Stone [53] ; Official Assignee of Madras v. Mercantile Bank of India Ltd. [54] ; and cf. s. 32(3) of the Act. That is what happened here. The dealer, in whose custody the motor vehicles remained at all material times, agreed to keep the motor vehicles as bailee for Natwest from the time when Natwest paid the dealer 90 per cent of the agreed price: see cl. 8 of the Agreement.

1. [1931] V.L.R. 413, at p. 439. 2. [1914] A.C. 823, at p. 843. 3. (1951) 82 C.L.R. 477, at p. 494. 4. (1951) 82 C.L.R. 621, at p. 641. 5. [1914] A.C., at p. 852. 6. (1965) 112 C.L.R. 192; [1965] A.C. 867. 7. (1809) 1 Taunt. 458 [127 E.R. 912]. 8. [1935] A.C. 53, at pp. 58-59.

It was submitted that two authorities stand in the way of construing delivery in s. 28(2) as including constructive delivery. Both arose under s. 28(1) or its equivalent. The first was Nicholson v. Harper [55] , where North J. said:

I read the Act to mean that there must be a delivery of the goods by the seller in possession, or, where there is no delivery of the goods, the transfer of documents of title - well-known mercantile documents, defined by the Act by reference. With that view, I respectfully agree. But his Lordship seemingly went on to hold that continuity of actual custody - in that case actual custody of the goods by the second buyer - is inconsistent with delivery of possession, saying [54] : In point of fact, the defendants have been in possession of the goods ever since the sale, and there has been no delivery or transfer to them of any kind since the sale. In Bank of New South Wales v. Palmer [56] , the original seller retained actual custody of the goods. Helsham J. drew attention to the fact that s. 28 does not speak of transfer of property in goods but transfer of goods, and said [57] : What does matter is that the section does not in terms refer to property in goods being the subject of any transfer, nor does it expressly refer to any transaction which is ordinarily accompanied only by a transfer of the property in goods rather than the goods themselves. That being so, I can see no reason for reading the words of the section in a way that would extend their operation beyond situations which are referred to, namely the delivery or transfer of goods or their documents of title. I am respectfully unable to accept these views. They leave out of account the statutory context. Section 28 is not speaking of a delivery of goods in vacuo; it is speaking of a delivery of goods under a sale, and it is undoubted that delivery under a sale may be effected constructively. The dealer did therefore deliver the motor vehicles to Natwest under the sale, the dealer had possession of the motor vehicles with the consent of Gamer when the sale was made, Natwest was an innocent sub-buyer and on delivery it acquired the title it would then have had if the delivery had been effected under a sale which Gamer had authorized. 1. [1895] 2 Ch. 415, at p. 418. 2. [1935] A.C. 53, at pp. 58-59. 3. [1970] 2 N.S.W.R. 532; 91 W.N. (N.S.W.) 580. 4. [1970] 2 N.S.W.R., at p. 536; 91 W.N. (N.S.W.), at p. 584.

It follows that Natwest's title prevails and that the appeal should be dismissed.

Gamer's Motor Centre (Newcastle) Pty. Ltd. ("Gamer") is a motor vehicle wholesaler and Evans & Rose Motors Pty. Ltd. ("the dealer") is a dealer in motor vehicles selling to the public. Natwest Wholesale Australia Pty. Ltd. ("Natwest"), formerly called Lombank Finance Pty. Ltd., is a finance company which had a floor plan agreement with the dealer to finance the purchase of stock by the latter.

Gamer sold eight motor vehicles to the dealer which took possession of them, although under the terms of sale property was not to pass until payment was made in full. Gamer gave the dealer seven days to pay. After the sale of the vehicles to the dealer, but before the seven days were up and before payment, the dealer purported to resell them to Natwest under the floor plan agreement. The dealer did not part with possession of the vehicles but each sale was evidenced by a document headed "Delivery Receipt for Trade-in or Used Vehicles". Each such receipt was issued by Natwest and was signed by a representative of the dealer. Natwest paid to the dealer 90 per cent of the agreed price of each vehicle pursuant to the terms of the floor plan agreement. Under that agreement property in the vehicles was to pass to Natwest upon that payment being made and the dealer was to take the vehicles on hire and keep them in its own possession as bailee for Natwest for display purposes. The dealer was to seek offers (but not as agent for Natwest) to purchase the vehicles or to take them on hire-purchase and upon being advised by the dealer of an offer in respect of a vehicle, Natwest might sell the vehicle to the dealer. The bailment would then end in respect of that vehicle but it would also end under the terms of the agreement by Natwest's taking or demanding possession of the vehicle and in various other ways.

The dealer failed to pay Gamer for the vehicles and Gamer seized them. Natwest sued Gamer in detinue and conversion for the return of the vehicles or, alternatively, their value. The trial judge found in favour of Natwest upon the basis that there had been a variation of the agreement between Gamer and the dealer authorizing the dealer to sell the vehicles. That finding was not upheld upon appeal by Gamer to the New South Wales Court of Appeal and need no longer concern us. Natwest also succeeded in the Court of Appeal, but this time upon the basis that s. 28(2) of the Sale of Goods Act 1923 NSW applied. Section 28 provides:

(1) Where a person having sold goods continues or is in possession of the goods or of the documents of title to the goods, the delivery or transfer by that person or by a mercantile agent acting for him of the goods or documents of title under any sale pledge or other disposition thereof to any person receiving the same in good faith and without notice of the previous sale shall have the same effect as if the person making the delivery or transfer were expressly authorised by the owner of the goods to make the same.

(2) Where a person having bought or agreed to buy goods obtains with the consent of the seller possession of the goods or the documents of title to the goods, the delivery or transfer by that person or by a mercantile agent acting for him of the goods or documents of title under any sale pledge or other disposition thereof to any person receiving the same in good faith and without notice of any lien or other right of the original seller in respect of the goods shall have the same effect as if the person making the delivery or transfer were a mercantile agent intrusted by the owner with the goods or documents of title.

(3) In this section the term "mercantile agent" means a mercantile agent having in the customary course of his business as such agent authority either to sell goods, or to consign goods for the purpose of sale, or to buy goods, or to raise money on the security of goods.

That section must be read with s. 5(1) of the Factors (Mercantile Agents) Act 1923 NSW which provides: Where a mercantile agent is entrusted as such with the possession of any goods or the documents of title to goods, any sale pledge or other disposition of the goods made by him in the ordinary course of business of a mercantile agent shall, subject to the provisions of this Act, be as valid as if he were expressly authorised by the owner of the goods to make the same:

Provided that the person taking under the disposition acts in good faith, and has not at the time of the disposition notice that the person making the disposition has not authority to make the same.

The dealer was a buyer in possession within the meaning of s. 28(2) pursuant to the sale of the vehicles to it by Gamer. However, it was submitted by the appellant that the sub-section had no application because there was no delivery of the vehicles by the dealer to Natwest and since the sub-section operates upon delivery, rather than the preceding sale (see Cahn v. Pockett's Bristol Channel Steam Packet Co. [58] ), property did not pass under it to Natwest.

In putting the submission that way, it is assumed that the sub-section, if it applied, operated to pass property in the goods to Natwest. In fact the sub-section says that the disposition "shall have the same effect as if the person making the delivery or transfer were a mercantile agent intrusted by the owner with the goods". That carries one to s. 5(1) of the Factors (Mercantile Agents) Act to discover what the effect of delivery by a mercantile agent would be and the answer is that a mercantile agent could pass property in goods which he did not own and was not authorized to sell providing he was acting in the ordinary course of business of a mercantile agent. Since delivery by a buyer in possession who is not a mercantile agent (and s. 28(2) is predicated upon that situation) will not be in the ordinary course of business of a mercantile agent, a literal reading of s. 28(2) of the Sale of Goods Act and s. 5(1) of the Factors (Mercantile Agents) Act would defeat the evident intent of the legislation. There is no such difficulty with s. 28(1) which gives the disposition the same effect as if the person making the delivery or transfer were expressly authorized by the owner of the goods to make the same. Notwithstanding the difference in wording between s. 28(1) and s. 28(2), the better view upon the authorities seems to be that s. 28(2) and s. 5(1) should be read together to achieve much the same effect as s. 28(1). That was the view adopted of the equivalent South Australian provisions in Langmead v. Thyer Rubber Co. Ltd. [59] where Reed J. said:

Section 25(2) of the Sale of Goods Act contains no stipulation that any sale etc. under which goods are delivered or transferred must, in order to be effective, be made in any particular manner, such as in the course of the business of a mercantile agent. The meaning of s. 25(2) appears to be that where, e.g., a sale by a person who has bought or agreed to buy goods has taken place, if the conditions therein stated are satisfied, the delivery or transfer of the goods is to have the same effect as if a sale of the goods had been legally effected by a mercantile agent, i.e., made by him when acting in the ordinary course of business as a mercantile agent. The same construction of the equivalent provisions was adopted in Lee v. Butler [60] and by the New Zealand Court of Appeal in Jeffcott v. Andrew Motors Ltd. [61] : see also Atiyah, Sale of Goods, 7th ed. (1985), pp. 301-302; Dean, Hire-Purchase Law in Australia, 2nd ed. (1938), pp. 54-56; Else-Mitchell & Parsons, Hire-Purchase Law, 4th ed. (1968), pp. 211-214. 1. [1947] S.A.S.R. 29, at p. 39. 2. [1893] 2 Q.B. 318. 3. [1960] N.Z.L.R. 721, at p. 729.

However, in Newtons of Wembley Ltd. v. Williams [62] the English Court of Appeal thought that, in order to give some effect to the difference in wording between the two parallel provisions, the buyer in possession must somehow be treated as a notional mercantile agent so that the question is whether the sale would have been in the ordinary course of business if he had been a mercantile agent. In that case the buyer satisfied that test as would the dealer in this case were the more restrictive approach to be adopted. It may be added that no question was raised concerning the bona fides of Natwest or that notice of the dealer's lack of authority had been given.

The transaction between the dealer and Natwest involved no change in the physical possession, or actual custody, of the vehicles and it is upon that basis that the appellant submitted that there was no delivery of them to Natwest within the meaning of s. 28(2). "Delivery" is defined in s. 5(1) of the Sale of Goods Act to mean "voluntary transfer of possession from one person to another" and if "possession" were to be read to mean "physical possession", then the appellants would succeed. But possession, or at all events the transfer of possession, has never been regarded by the law as confined to physical possession and it is expressly provided by s. 4(2) of the Sale of Goods Act that the rules of the common law, save in so far as they are inconsistent with the express provisions of the Act, shall continue to apply to contracts for the sale of goods. This indicates, in a general if not specific sense, that the words of the Act should, where they have a legal signification, be given their accepted meaning.

It is true that in Pacific Motor Auctions Pty. Ltd. v. Motor Credits (Hire Finance) Ltd. [63] , the Privy Council, in determining when a seller continues or is in possession of goods for the purpose of s. 28(1), read the sub-section as being inapplicable in cases where there had been a break in the continuity of physical possession. There could be no difference in this respect between s. 28(1) and s. 28(2). However, that construction, whilst supported by the history of the legislation, was based upon the object of the section which is to protect innocent purchasers from being deceived by the appearance of ownership which goes with uninterrupted possession. That same object could not be assisted by requiring a transfer of physical possession in order to effect delivery. In any event, there could be no warrant for construing the word "possession" in the definition of delivery in s. 5(1) by reference to the word possession in s. 28, having regard to the quite different context in which it appears.

In Pollock & Wright, Possession in the Common Law (1888), Ch. II, Pt 7 (written by Sir Frederick Pollock), it is pointed out that the authorities upon acceptance and receipt within the Statute of Frauds 1677 show that there are several ways in which a change of possession may take place without any change in actual custody. Such a change of possession, it is said, is commonly spoken of as constructive delivery. Section 17 of the Statute of Frauds 1677, which is now to be found in s. 9 of the New South Wales Sale of Goods Act, dispenses with the requirement of a written contract where the buyer accepts part of the goods sold and actually receives the same, but the cases dealing with acceptance and receipt are not merely concerned with the construction of those words in their statutory context. They have a wider significance which extends to the whole question of the manner in which possession in goods may be transferred, receipt and possession being entwined concepts.

The first of the three examples given by Sir Frederick Pollock is where a seller in possession assents to hold the thing sold on account of the buyer: Pollock & Wright, op. cit., pp. 72-73. This, he says, has the same effect as physical delivery to the buyer. By way of illustration two cases are cited. In Elmore v. Stone [64] the defendant bought two horses from the plaintiff, who kept a livery stable, and required the plaintiff to keep them at livery for him. The plaintiff then put the horses in another stable kept for other peoples' horses and for which a charge was made. The plaintiff sued for the price of the horses. Lord Mansfield [65] observed that it was a case of constructive delivery: from the time the plaintiff accepted the defendant's order, he possessed the horses, not as owner, "but as any other livery stable keeper might have them to keep". They were in effect in the defendant's possession. In Marvin v. Wallis [66] , the second illustration given, the plaintiff sued for the price of a horse which he had sold to the defendant. The bargain was for immediate delivery but the defendant lent the horse to the plaintiff until he got another. It was held that there was acceptance and receipt by the defendant. Elmore v. Stone was applied, Coleridge J. regarding it as a case in which apparent possession remained unchanged but in which the character of the possession was altered.

1. (1809) 1 Taunt. 458 [127 E.R. 912]. 2. (1809) 1 Taunt., at p. 460 [127 E.R., at p. 913]. 3. (1856) 6 El. & Bl. 726 [119 E.R. 1035].

The second example of constructive delivery given by Sir Frederick Pollock is where goods are in the custody of a third person and the seller and buyer agree, with the assent of that person, that they shall be held in the name or on account of the buyer: Pollock & Wright, op. cit., pp. 73-74. This he describes as an agreement of attornment. Delivery by attornment is recognized in the rules as to delivery in the New South Wales Sale of Goods Act. Section 32(3) of that Act provides that where "the goods at the time of sale are in the possession of a third person, there is no delivery by seller to buyer unless and until the third person acknowledges to the buyer that he holds the goods on his behalf ". This provision, when read in conjunction with the definition of delivery in s. 5(1) further indicates that the term "possession" in that definition is to be given its full legal significance.

The third example of constructive delivery given by Sir Frederick Pollock is where the buyer is in possession of the goods as the seller's bailee: Pollock & Wright, op. cit., pp. 74-75. In that case there may be a sufficient acceptance and receipt of the goods by the change in the character of possession notwithstanding that there is no change in physical possession.

In Dublin City Distillery Ltd. v. Doherty [67] Lord Atkinson reviewed the cases on constructive delivery and reaffirmed the authority of Elmore v. Stone: cf. Proctor v. Jones [68] . The principle extracted by Lord Atkinson was that "if a vendor who has sold goods should, after the sale has been completed, agree with the vendee to retain the physical possession of the goods, but on such terms that the nature and character of his former possession is changed from that of owner to that of bailee for the purchaser, that transaction will amount to an acceptance and actual receipt of the goods within the 17th section of the Statute of Frauds, and necessarily to a good constructive delivery sufficient to create a pledge" [69] : see also Lord Parker [70] . In Minister for Supply & Development v. Servicemen's Co-operative Joinery Manufacturers Ltd. [71] , Williams J. repeated an observation made earlier by himself and Kitto J. in Akron Tyre Co. Pty. Ltd. v. Kittson [72] relying upon the authorities already mentioned above:

It is well established that constructive delivery sufficient to pass the title in chattels may be effected by a change in the character of an uninterrupted custody. See also Minister for Supply & Development v. Servicemen's Co-operative Joinery Manufacturers Ltd. [73] ; Mills v. Charlesworth [74] . 1. [1914] A.C. 823. 2. (1826) 2 Car. & P. 532 [172 E.R. 241]. 3. [1914] A.C., at p. 844. 4. [1914] A.C., at p. 852. 5. (1951) 82 C.L.R. 621, at p. 641. 6. (1951) 82 C.L.R. 477, at p. 494. 7. (1951) 82 C.L.R., at pp. 635, 643. 8. (1890) 25 Q.B.D. 421, at p. 425.

Delivery is sometimes said to be constructive where it is symbolic as, e.g., where the keys to goods kept under lock and key are handed over. Sir Frederick Pollock doubted that in such circumstances, at least where control of the goods went with the key, there was a mere symbolic transfer of possession: see Pollock and Wright, op. cit., p. 61. He preferred the view that there was a transfer of control in fact which constituted a change in possession. For it is control which is central to the notion that possession in law may consist of something other than physical or actual possession.

In the present case, the dealer was not only a buyer in possession pursuant to the sale of the vehicles to it by Gamer, but also a bailee of the vehicles from Gamer, property not having passed. An obligation to redeliver the goods to the bailor at the conclusion of the bailment is no longer a necessary feature of bailment: Motor Mart Ltd. v. Webb [75] . This is exemplified by the modern hire-purchase agreement under which the hirer is a bailee, but is under no obligation to return the goods if he exercises the option to purchase: Karflex Ltd. v. Poole [76] . The fact that the dealer was the buyer of the vehicles was, therefore, no impediment to his being also a bailee of them until such time as property passed to him or the bailment was otherwise determined: see the discussion in Palmer, Bailment (1979), pp. 4-5. The classification of the dealer's right to possession is, however, less important than the fact, for that right carried with it the capacity to pass control in such a way as to amount to a constructive delivery of the goods. The dealer might have physically delivered the vehicles to Natwest pursuant to the sale by it to Natwest. There would then have been a delivery for the purposes of s. 28(2). In fact it sold the vehicles to Natwest and agreed at the same time to take them on hire from Natwest, thus creating a bailment.

1. [1958] N.Z.L.R. 773. 2. [1933] 2 K.B. 251, at pp. 263-264.

That bailment was not created by way of attornment nor was it a sub-bailment. But it is important to recognize that just as with attornment or sub-bailment delivery may be effected constructively by an alteration in control without any change in physical possession, so in this case the simultaneous sale by the dealer to Natwest and the acknowledgment by the dealer of the passing of control to Natwest was sufficient to constitute a constructive delivery of the vehicles by the dealer to Natwest. The character of the possession of the vehicles by the dealer was altered. The same would have been so had there been an attornment or sub-bailment, but in this case, upon delivery, property simultaneously passed under s. 28(2) from Gamer through the dealer to Natwest, and any bailment of the vehicles by Gamer to the dealer came to an end at the same time as the bailment by Natwest to the dealer came into existence. The bailment of the vehicles by Natwest to the dealer was a fresh bailment which was neither in substitution for any bailment between Gamer and the dealer nor a sub-bailment.

The argument put by the appellant, as I understand it, went further than to contend that, merely as a matter of construction, the delivery of goods referred to in s. 28(2) must be confined to a physical delivery. It was submitted that even if the creation of a bailment between Natwest and the dealer could amount to a constructive delivery, the dealer was, without the aid of s. 28(2), unable to pass property in the vehicles to Natwest and it was only if it could do that that the latter could make the dealer its bailee.

That argument, however, fails to recognize that the dealer, being in possession of the vehicles, was capable not only of effecting a physical delivery of them to Natwest, but was also capable of altering the character of its possession of the vehicles in such a manner as to amount to a constructive delivery of them. Constructive delivery is not dependent upon the deliveror having, or being able to pass, property in the goods delivered. Of course, the possessory rights conferred would, save for some such provision as s. 28, be liable to be defeated by the true owner. But property or title is something different from possession and a person in actual possession, being able to deliver goods by physically handing them over to another, must be in a position to effect constructive delivery by acknowledging control of the goods in that other without an alteration in physical possession. If it were otherwise a mere token handing over of possession and an immediate handing back would suffice to effect delivery whereas an express agreement for the transfer of control would not. That would be quite artificial.

Thus constructive delivery by the dealer was not dependent upon the application of s. 28(2), although at the same time as constructive delivery took place, the sub-section applied to pass property in the goods. Such a result is entirely consistent with the underlying policy of the sub-section which is to afford protection to an innocent purchaser relying upon the apparent ownership of a vendor who is a buyer in possession under a previous sale.

It remains only to deal with two authorities which the appellant submitted were concluded in his favour. The first was Nicholson v. Harper [77] in which a merchant sold wine stored in the cellars of a warehouseman and afterwards pledged the wine to the warehouseman for advances made in good faith without notice of the sale. It was held that the pledge conferred no title to the wine. In that case, however, it was held that there had been no transfer of possession, constructive or otherwise, since the custody of the wine remained with the warehouseman from beginning to end. The warehouseman was not informed of the sale of the wine and did not attorn to the purchaser. He continued to hold the wine for the merchant and in designating the wine as security for the loan by the warehouseman to the merchant, the latter neither handed over the wine physically nor effectuated a change in the character of the warehouseman's possession which could amount to a constructive delivery to him. There was no attornment by the warehouseman, which is hardly surprising since the warehouseman would be both attornor and attornee. The case is not, in my view, authority for the proposition that actual delivery is required for the application of a provision such as s. 28(2). Even if upon a contrary view the character of the warehouseman's possession of the wine changed by his becoming pledgee rather than bailee, there was no consideration of the question of constructive delivery nor, apparently, was it thought to be necessary: cf. Sutton, Sales and Consumer Law in Australia and New Zealand (1983), p. 336.

The second case is Bank of New South Wales v. Palmer [78] . In that case a boat builder gave to the plaintiff bank a bill of sale over a boat which he was building for the defendant under an agreement which provided that the property in the boat was to pass to the defendant from the commencement of construction. The boat builder remained in possession of the boat throughout. The bank, relying on s. 28(1) of the Sale of Goods Act, sought to take possession of the boat upon the bankruptcy of the boat builder and to sell it. Helsham J. held that s. 28(1) had no application and expressed the view that "the words of the section must be read in a way that restricts their operation to cases in which a change in physical possession of goods or title deeds occurs" [79] . For the reasons which I have already given I cannot accept that view, but it must be said that it does not appear whether any attornment clause was contained in the bill of sale or whether the question of constructive delivery was argued at all.

1. [1970] 2 N.S.W.R. 532; 91 W.N. (N.S.W.) 580. 2. [1970] 2 N.S.W.R., at p. 536; 91 W.N. (N.S.W.), at p. 584.

In Bishopsgate Motor Finance Corporation Ltd. v. Transport Brakes Ltd; Winsor Garage, Third Party [80] , Denning L.J. said:

In the development of our law, two principles have striven for mastery. The first is for the protection of property: no one can give a better title than he himself possesses. The second is for the protection of commercial transactions: the person who takes in good faith and for value without notice should get a good title. The first principle has held sway for a long time, but it has been modified by the common law itself and by statute so as to meet the needs of our own times. 1. [1949] 1 K.B. 322, at pp. 336-337.

In this appeal the Court is required to consider and apply the two competing principles.

The respondent is a finance company. On 17 November 1978 it entered into a "Used Vehicle Bailment Agreement" with Evans & Rose Motors Pty. Ltd., a car dealer. The agreement was a form of floor plan arrangement by which the respondent financed the dealer in purchasing motor vehicles. The dealer agreed to sell each vehicle so financed to the respondent and then to take it on hire and hold it as bailee for the respondent for display purposes. In July 1979 the respondent, pursuant to the terms of the agreement, purported to buy eight motor vehicles from the dealer. The dealer signed eight documents, each addressed to the respondent and described as "Delivery Receipt for Trade-in or Used Vehicles". The respondent paid the dealer 90 per cent of the agreed price of each vehicle, in accordance with the agreement.

Before the "purchase" of the eight vehicles by the respondent, the dealer had agreed to buy them from the appellant which was a motor vehicle wholesaler. The dealer did not pay for the vehicles; nevertheless the appellant gave possession of them to the dealer which took them to its premises. Clause 4 of the invoice regulating the sale of each vehicle from the appellant to the dealer read: "Where payment is made other than in full settlement and in cash, all property rights in the vehicle remain in the vendor."

It was common ground that, by reason of cl. 4, no property in any vehicle passed from the appellant to the dealer until payment of the purchase price.

Late in July the appellant seized the vehicles because of nonpayment of the purchase price by the dealer. In the District Court of New South Wales the respondent was awarded damages against the appellant for the value of motor vehicles unlawfully detained by the appellant. An appeal to the Court of Appeal was dismissed. By this appeal the appellant seeks to set aside the order of the Court of Appeal and the judgment of the District Court against it.

Section 28(2) of the Sale of Goods Act 1923 NSW reads:

Where a person having bought or agreed to buy goods obtains with the consent of the seller possession of the goods or the documents of title to the goods, the delivery or transfer by that person or by a mercantile agent acting for him of the goods or documents of title under any sale pledge or other disposition thereof to any person receiving the same in good faith and without notice of any lien or other right of the original seller in respect of the goods shall have the same effect as if the person making the delivery or transfer were a mercantile agent intrusted by the owner with the goods or documents of title.

The contest between the parties largely turns on the question whether delivery in s. 28(2) means actual delivery or whether it includes constructive delivery. The dealer, having agreed to buy the motor vehicles from the appellant, obtained possession of those vehicles with the appellant's consent. Each delivery receipt document addressed by the dealer to the respondent referred to the dealer having "taken delivery" of the vehicle in question from the respondent in terms of the bailment agreement between them. But there had been no prior actual delivery or transfer of the motor vehicles or the documents of title relating to them from the dealer to the respondent. It followed that the respondent could not claim the benefit of s. 28(2) unless constructive delivery fell within the language of the sub-section.

There is no doubt where the common law stood, at least until the nineteenth century. The principle underlying the aphorism nemo dat quod non habet has been described as an "article of faith": Goode, Commercial Law (1982), p. 392. The rule is enshrined in s. 26(1) of the Sale of Goods Act in these words:

Subject to the provisions of this Act, where goods are sold by a person who is not the owner thereof and who does not sell them under the authority or with the consent of the owner, the buyer acquires no better title to the goods than the seller had, unless the owner of the goods is by his conduct precluded from denying the seller's authority to sell.

With the development of commerce and the provision of credit it became apparent that some protection was necessary for the innocent purchaser "if goods were to move freely in the stream of trade": Goode, p. 392. Nevertheless the defences available at common law to an innocent purchaser against the true owner of goods were very limited. They were enumerated by Willes J. in Fuentes v. Montis [81] .

Statutory inroads into the common law's insistence that a transferor of goods could give no better title than he himself possessed came initially through the Factors Acts. They had what the Privy Council described in Pacific Motor Auctions Pty. Ltd. v. Motor Credits (Hire Finance) Ltd. [82] as "the object of mitigating the asperity of the common law towards an innocent party purchasing goods from a person who has all the trappings of ownership but in truth has no proper title to the goods".

1. (1965) 112 C.L.R. 192, at p. 199; [1965] A.C. 867, at p. 882.

Through the Factors Acts (U.K.) of 1823, 1825, 1842, 1877 and the consolidation of 1889, a measure of protection was given, at first to those who dealt with mercantile agents in possession of goods and later to those who dealt with such agents in possession of documents of title. Thereafter protection was extended to those who dealt with a seller who, having sold goods, continued in possession of them or their documents of title and to those who dealt with a buyer who, having bought or agreed to buy goods, obtained possession of them or their documents of title. Sections 8 and 9 of the Factors Act 1889 were incorporated in s. 28(1) and (2) of the Sale of Goods Act of New South Wales.

While the Factors Acts and the relevant provisions of the Sale of Goods Acts represented a clear movement away from the common law, they did not abrogate the common law rules in their entirety. Some of the limitations of the English equivalent of s. 28(1) are explored by Rutherford and Todd in "Section 25(1) of the Sale of Goods Act 1893: The Reluctance to Create a Mercantile Agency", [1979] Cambridge Law Journal, 346.

And it is not the case that sub-ss. (1) and (2) of s. 28 are entirely complementary. There are important differences between them; those differences are explored by Professor Sutton in Sales and Consumer Law in Australia and New Zealand, 3rd ed. (1983), pp. 330-335. Sub-section (1) requires that there be a sale by the person who continues or is in possession of the goods or documents of title. Sub-section (2) applies where a person has "bought or agreed to buy goods". Thus it is enough in the present case, for the purposes of sub-s. (2), that the dealer bought or agreed to buy the motor vehicles from the appellant. Sub-section (1) does not require that the seller be in possession with the consent of the buyer; sub-s. (2) makes the seller's consent to the buyer's obtaining possession necessary. In the present case the dealer was in possession of the motor vehicles with the consent of the appellant.

The important question, as already noted, is whether the reference to delivery in sub-s. (2) is confined to actual delivery or whether the term embraces constructive delivery. Section 28 validates the delivery or transfer of goods or documents of title in the circumstances there mentioned by giving that delivery or transfer the same effect as if the person making the delivery or transfer were a mercantile agent entrusted by the owner with the goods or documents of title. But the statutory title conferred on the innocent third party depends on the delivery or transfer and not on the prior bargain: seeCahn v. Pockett's Bristol Channel Steam Packet Co. [83] ; City Fur Manufacturing Co. Ltd. v. Fureenbond (Brokers) London Ltd. [1] .

1. [1899] 1 Q.B. 643, at pp. 654-655. 2. [1937] 1 All E.R. 799, at p. 802.

In my view, the "delivery" spoken of in s. 28(2) is actual delivery to a thid party. There was no actual delivery to the respondent, hence the sub-section did not operate to confer any title on the respondent.

A similar view of "delivery", as it appears in s. 28 and its equivalents, is implicit in the judgment of North J. in Nicholson v. Harper [2] , and explicit in the judgments of Helsham J. in Bank of New South Wales v. Palmer [3] and O'Regan J. in N.Z. Securities & Finance Ltd. v. Wrightcars Ltd. [4] .

1. [1895] 2 Ch. 415. 2. [1970] 2 N.S.W.R. 532; 91 W.N. (N.S.W.) 580. 3. [1976] 1 N.Z.L.R. 77.

Bank of New South Wales v. Palmer concerned a contract by a boat builder to build a catamaran for the defendant. Under the agreement payments were to be made during construction but the defendant became the owner of the boat from the time construction began. The plaintiff, which was the boat builder's bank, sought security for his overdrawn account. The boat builder gave the plaintiff a false picture of his arrangements with the defendant, asserting that he (the builder) was the owner of the boat. The plaintiff accepted a trader's bill of sale in its favour; the boat remained with the builder. Helsham J. dismissed the plaintiff's claim for possession of the boat, saying [5] :

I am of the view that the words of the section must be read in a way that restricts their operation to cases in which such a change in physical possession of goods or title deeds occurs, and I do not think to read the words in this way is other than in accordance with how they appear in the section and what was intended to be the operation of the section. What does matter is that the section does not in terms refer to property in goods being the subject of any transfer, nor does it expressly refer to any transaction which is ordinarily accompanied only by a transfer of the property in goods rather than the goods themselves. That being so, I can see no reason for reading the words of the section in a way that would extend their operation beyond situations which are referred to, namely the delivery or transfer of goods or their documents of title. I believe that the view which I have formed is reinforced by the use of the word "receiving" in relation to the person involved as purchaser, pledgee or disponee in the second or subsequent transaction. 1. [1970] 2 N.S.W.R., at p. 536; 91 W.N. (N.S.W.), at p. 584.

His Honour's reference to "receiving" is a reference to sub-s. (1) of s. 28; but the word appears also in sub-s. (2), lending support to the notion that actual delivery is intended.

It follows that I respectfully dissent from the view of McHugh J.A. in the present appeal that Bank of New South Wales v. Palmer and the earlier English decision of Nicholson v. Harper were wrongly decided. His Honour regarded it as significant that "Other sections of the Sale of Goods Act 1923 show quite clearly that there can be delivery i.e. "a voluntary transfer of possession" for the purposes of the Act without a change in the physical custody of goods: ss. 32(3) and 43(2)". But, so far as s. 32(3) is concerned, the sub-section itself recognizes that delivery may be constructive. It lies within Pt IV of the Act, entitled "Performance of the Contract". It is concerned only with the relationship between seller and buyer, a quite different situation from that to which s. 28 is directed. It provides that where goods, at the time of sale, are in the possession of a third person, there is no delivery by seller to buyer "unless and until the third person acknowledges to the buyer that he holds the goods on his behalf". Even then, there is a proviso that "nothing in this section shall affect the operation of the issue or transfer of any document of title to goods". But it is apparent that the purpose of sub-s. (3) is to withhold the notion of delivery between seller and buyer until the third person acknowledges to the buyer that he holds the goods on his behalf, a step that requires no actual delivery of the goods.

I do not think that s. 43(2) recognizes that there can be delivery without a change in the physical custody of goods. The sub-section is concerned with an unpaid seller's lien and simply permits the exercise of the right of lien, even though the seller is in possession as agent or bailee for the buyer. The sub-section is not concerned with delivery but with ensuring that the possessory lien conferred by s. 43(1) extends to the seller even though his possession is as agent or bailee for the buyer.

The word "delivery" is defined in s. 5(1) of the Sale of Goods Act to mean, unless the context or subject otherwise requires, "voluntary transfer of possession from one person to another". It is true that for certain purposes the law has recognized that there may be a change in possession without a physical movement of goods. An example is in the area of enforceability of contracts for the sale of goods. Pollock & Wright, Possession in the Common Law (1888), comment at p. 72 :

The authorities both on acceptance and actual receipt within the Statute of Frauds and on the rights of unpaid vendors show that in several ways there may be a change of possession without any change of the actual custody. Such a change of possession is commonly spoken of as constructive delivery.

Whatever view may be taken of possession and its transfer in the situations to which the authors refer, the context of s. 28(2) and the plain meaning of the words it uses lead to the conclusion that the "delivery" it speaks of is actual delivery. The sub-section requires for its operation that there be a delivery or transfer of goods or documents of title and that there be a person "receiving the same in good faith ". These are ordinary words and I agree with the learned President of the Court of Appeal, Kirby P., that they should be given their ordinary meaning. If a third party deals with a person in possession of goods or documents of title without taking actual delivery or a transfer of those goods or the documents of title relating to them, there are no evident policy considerations that warrant giving some extended meaning to the language of the sub-section.

Counsel for the respondent pointed to what he said would be the unfortunate commercial consequences of confining "delivery" in s. 28(2) to actual delivery. But such a pessimistic view is not warranted. Speaking of the expression "continues in possession" in s. 28(1), the Privy Council said in Pacific Motor Auctions Pty. Ltd. v. Motor Credits (Hire Finance) Ltd. [6] :

Their Lordships do not think that such a view of the law which they believe Parliament to have intended could in practice create any adverse effect. It would mean that when a person sells a car to a finance house in order to take it back on hire purchase the finance house must take physical delivery if it is to avoid the risk of an innocent purchaser acquiring title to it. It is true that some commodities do not readily lend themselves to physical delivery. However, s. 28(2) contemplates a change in the physical possession of goods or their documents of title in order that the sub-section might operate. Whether symbolical physical delivery meets the requirements of the sub-section is a matter upon which it is unnecessary to comment: see Sutton, p. 337. 1. (1965) 112 C.L.R., at pp. 204-205; [1965] A.C., at p. 888.

I am of opinion that the appeal should be allowed, the order of the Court of Appeal be set aside, the judgment of the District Court be set aside and that in lieu thereof there be judgment for the appellant.

The rights of the appellant and respondent to this appeal depend upon s. 28(2) of the Sale of Goods Act 1923 NSW ("the Act"). By that sub-section it is provided that:

Where a person having bought or agreed to buy goods obtains with the consent of the seller possession of the goods or the documents of title to the goods, the delivery or transfer by that person or by a mercantile agent acting for him of the goods or documents of title under any sale pledge or other disposition thereof to any person receiving the same in good faith and without notice of any lien or other right of the original seller in respect of the goods shall have the same effect as if the person making the delivery or transfer were a mercantile agent intrusted by the owner with the goods or documents of title.

By s. 5(1) of the Factors (Mercantile Agents) Act 1923 NSW a sale, pledge or other disposition of goods in the ordinary course of business of a mercantile agent, by a mercantile agent entrusted with the possession of goods or the documents of title to goods is, subject to that Act, as valid as if he were expressly authorized by the owner of the goods to make the sale, pledge or other disposition.

In the present case, a used motor vehicle dealer, Evans & Rose Motors Pty. Ltd. ("the dealer"), obtained possession of eight motor vehicles with the consent of the appellant, Gamer's Motor Centre (Newcastle) Pty. Ltd. ("the wholesaler") pursuant to an agreement or agreements to buy the same. The invoices relating to the sales specified, inter alia, that:

Where payment is made other than in full settlement and in cash, all property rights in the vehicle remain in the vendor.

The dealer did not pay the wholesaler. Earlier the dealer had entered into an agreement called a "Used Vehicle Bailment Agreement" with the respondent, Natwest Wholesale Australia Pty. Ltd., previously known as Lombank Finance Pty. Ltd. ("the finance company") under which it was agreed that the dealer might from time to time sell to the finance company used motor vehicles previously acquired by the dealer as stock. The agreement did not effect a sale of any particular vehicles, but did set forth the terms upon which vehicles would be sold by the dealer to the finance company. One such term was that the dealer would take on hire every vehicle sold to the finance company under the Used Vehicle Bailment Agreement and keep the same in its own possession as bailee for the finance company. The agreement contained specific terms as to that bailment but they are not relevant to the determination of this matter.

Without having paid for the vehicles which the dealer agreed to buy from the wholesaler, the dealer completed and signed in respect of each vehicle a document entitled "Delivery Receipt for Trade-in or Used Vehicles" ("the Delivery Receipt") and delivered the document to the office of the finance company. Each document contained a brief description of the vehicle concerned, its purchase price, and a statement by the dealer acknowledging that it had taken delivery of the vehicle described in the Delivery Receipt in the terms of the Used Vehicle Bailment Agreement.

At some stage the dealer obtained possession of the eight motor vehicles. The evidence as to whether this was prior or subsequent to the handing over of the completed and signed Delivery Receipts is not entirely clear. However, in view of the way in which the argument proceeded, it is not necessary to pursue that issue, or the question whether s. 28(2) operates in the circumstance in which a purchaser, not being in possession of the goods, enters into an agreement for the sale, pledge or other disposition of the goods, but subsequently obtains possession of the goods or documents of title, and thereafter delivers the goods or transfers the documents under the sale, pledge or disposition. In the present case, some days after the dealer obtained possession, the wholesaler, not having received the moneys payable in respect of the sale of the vehicles, retook possession of them. In consequence the finance company brought an action against the wholesaler in the District Court of New South Wales for damages for conversion and recovered judgment. An appeal against that judgment to the Court of Appeal of the Supreme Court of New South Wales was dismissed.

The question for determination is whether the actions of the dealer in completing and signing the Delivery Receipts and attending the office of the finance company, or any of them, constituted delivery of the motor vehicles within the meaning of that word as used in s. 28(2) of the Act. For these actions, or any of them, to constitute delivery, "delivery" as used in s. 28(2) must include constructive delivery for it is common ground that there was no actual delivery of the motor vehicles and no transfer of the documents of title to the motor vehicles.

"Delivery" is defined in s. 5(1) of the Act as meaning, unless the context or subject-matter otherwise requires, the "voluntary transfer of possession from one person to another". It was established law, prior to the passing of the Sale of Goods Act 1893 UK, upon which the New South Wales Act is based, that there could be a transfer of possession without physical delivery of goods. In Pollock & Wright's Possession in the Common Law (1888), Sir Frederick Pollock observed, at p. 72 :

The authorities both on acceptance and actual receipt within the Statute of Frauds and on the rights of unpaid vendors show that in several ways there may be a change of possession without any change of the actual custody.

The authorities referred to include Elmore v. Stone [7] ; Marvin v. Wallis [8] and Godts v. Rose [9] . Although Elmore v. Stone was said to be overruled in Proctor v. Jones [10] it was used by Lord Atkinson in Dublin City Distillery Ltd. v. Doherty [11] as an example of "good constructive delivery".

1. (1809) 1 Taunt. 458 [127 E.R. 912]. 2. (1856) 6 El. & Bl. 726 [119 E.R. 1035]. 3. (1855) 17 C.B. 229 [139 E.R. 1058]. 4. (1826) 2 Car. & P. 532, at p. 534 [172 E.R. 241, at p. 243]. 5. [1914] A.C. 823, at p. 844.

The definition in s. 5(1) of the Act is not restricted to a change in the actual custody of the goods. Its terms are wide enough to comprehend change in possession without change in custody. As was pointed out in the judgment of McHugh J.A. in the Court of Appeal, there are provisions in the Act which predicate that delivery may be effected without a change in actual custody. His Honour referred to ss. 32(3) and 43(2) of the Act. Section 32(3) provides that:

Where the goods at the time of sale are in the possession of a third person, there is no delivery by seller to buyer unless and until the third person acknowledges to the buyer that he holds the goods on his behalf Section 43(2) provides: The seller may exercise his right of lien notwithstanding that he is in possession of the goods as agent or bailee for the buyer.

In my view neither provision is, by itself, determinative of the meaning of "delivery" as defined in s. 5(1) of the Act. Section 32(3) is capable of itself constituting a context requiring that "delivery" include constructive delivery, rather than the meaning assigned in s. 5(1). Section 43(2) does not preclude the possibility that the seller has obtained possession by delivery and re-delivery.

It is the duty of the seller to deliver the goods, and of the buyer to accept and pay for them, in accordance with the terms of the contract of sale.

Section 30 provides no context requiring "delivery" to be understood differently from its definition in s. 5. If the definition is limited in its operation so as to exclude constructive delivery, then much of commerce in relation to commodities which do not readily lend themselves to physical delivery would become unduly burdened. Accordingly, in my view, the definition of delivery in s. 5(1) of the Act includes constructive delivery. It is therefore necessary to consider whether the context or subject-matter of s. 28(2) of the Act requires that "delivery" when therein used should be limited in its meaning to actual delivery.

At least three cases, Nicholson v. Harper [12] ; Bank of New South Wales v. Palmer [13] and N.Z. Securities & Finance Ltd. v. Wrightcars Ltd. [14] , have been accepted as authority by learned text-book writers that the delivery contemplated by s. 28, or its equivalent in other legislation, is actual delivery: see, e.g., Professor Sutton's Sales and Consumer Law in Australia and New Zealand, 3rd ed. (1983), pp. 335-337. Of those cases, only N.Z. Securities was concerned with the situation covered by sub-s. (2), which has operation when a purchaser obtains possession of goods or the documents of title, as distinct from the situation covered by sub-s. (1), which has operation when a vendor continues or is in possession of goods or the document of title. Only Bank of New South Wales v. Palmer identified a context or subject-matter requiring a meaning of "delivery" when used in s. 28, or its equivalent, different from its statutory definition.

1. [1895] 2 Ch. 415. 2. [1970] 2 N.S.W.R. 532; 91 W.N. (N.S.W.) 580. 3. [1976] 1 N.Z.L.R. 77.

The decision in Nicholson v. Harper is of long standing. As pointed out by McHugh J.A., it did not in terms decide that actual delivery is necessary for the operation of the equivalent of sub-s. (1). What it did decide was that there must be "some delivery or transfer after the sale": Nicholson v. Harper [15] . In the result North J. held that the defendants had "been in possession of the goods ever since the sale, and there [had] been no delivery or transfer to them of any kind since the sale". I read the judgment of North J. as meaning not that there must be actual delivery, but that for the section to operate there must be two distinct events being first, a sale, pledge or other disposition, and secondly, a delivery or transfer.

Sub-sections (1) and (2) validate delivery or transfer, and not the sale, pledge or other disposition (see Cahn v. Pockett's Bristol Channel Steam Packet Co. [16] and City Fur Manufacturing Co. Ltd. v. Fureenbond (Brokers) London Ltd. [1] ), and in my view, necessarily contemplate that delivery or transfer will be constituted by something additional to or independent of the sale, pledge or other disposition. In other words the sale, pledge or other disposition cannot constitute the delivery required by the sub-section. Such a construction limits the circumstances in which constructive delivery will be validated by the sub-section, but does not entirely exclude such validation if the constructive delivery is constituted by some event independent of or additional to the sale, pledge or other disposition.

1. [1899] 1 Q.B. 643. 2. [1937] 1 All E.R. 799.

In Bank of New South Wales v. Palmer [2] , Helsham J., whose reasoning was adopted by O'Regan J. in N.Z. Securities & Finance Ltd. v. Wrightcars Ltd. [3] , expressly held "that the words of the section must be read in a way that restricts their operation to cases in which such a change in physical possession of goods or title deeds occurs". His Honour reached that conclusion because "the section does not in terms refer to property in goods being the subject of any transfer, nor does it expressly refer to any transaction which is ordinarily accompanied only by a transfer of the property in goods rather than the goods themselves". I agree with that observation, but such observation requires only that the delivery be constituted by some event other than the passing of property by sale, pledge or other disposition, as I understand North J. to have held in Nicholson v. Harper. The statement in his judgment [4] that the delivery should be "after" or "since" the sale, serves to illustrate that delivery must be effected by some act separate from the sale. Ordinarily it will take place after sale.

1. [1970] 2 N.S.W.R., at p. 536; 91 W.N. (N.S.W.), at p. 584. 2. [1976] 1 N.Z.L.R. 77. 3. [1895] 2 Ch., at p. 418.

Accordingly I am of the view that delivery in s. 28(2) of the Act does not exclude constructive delivery, provided that the constructive delivery is effected by some act or event independent of or additional to the sale, pledge or other disposition by a purchaser in possession of goods with the consent of a seller. Thus it would be sufficient delivery for the purpose of s. 28(2) if the bailee of the purchaser who obtained possession with the consent of his vendor attorned to a sub-purchaser.

It remains to be considered whether the actions of the dealer in the present case constituted such delivery. Before dealing with that question it is convenient to consider the argument advanced on behalf of the respondent that delivery was effected by the dealer's acknowledgment that he held the motor vehicles as bailee for the finance company in accordance with the Used Vehicle Bailment Agreement. The acknowledgment was an acknowledgment by the dealer that it had taken delivery of the vehicle described in the Delivery Receipt in the terms of the Used Vehicle Bailment Agreement. Although the Used Vehicle Bailment Agreement provided for the sale of motor vehicles previously acquired by the dealer as stock, the acknowledgment did not touch the question of delivery by the dealer to the finance company, that being the delivery relevant to the operation of s. 28(2).

The acknowledgment may have set up, as between the dealer and the finance company, a conventional estoppel whereby neither could assert as against the other that there had been no delivery by the dealer, as vendor, to the finance company, as purchaser, because that delivery was assumed as the conventional basis of their transaction: see per Dixon J. in Grundt v. Great Boulder Pty. Gold Mines Ltd. [5] . However, an estoppel as between the dealer and the finance company cannot affect the position of the wholesaler. Accordingly, the acknowledgment did not constitute a delivery, constructive or otherwise, by the dealer to the finance company.

The only other actions which could constitute delivery by the dealer to the finance company are the completion, signing and handing over by the dealer of the Delivery Receipts. Those actions were not independent of or additional to the sale by the dealer to the finance company, but were steps in the sale of the vehicles on the terms contained in the Used Vehicle Bailment Agreement, the sale being completed when the finance company handed over the cheques for the purchase price to the dealer. Such actions cannot constitute delivery within the meaning of s. 28(2) of the Act.

The appeal should be allowed; the order of the Court of Appeal of the Supreme Court of New South Wales set aside, and in lieu thereof an order should be made setting aside the judgment of the District Court. In lieu thereof there should be judgment for the appellant. The respondent should pay the costs of the proceedings in the District Court, the Court of Appeal and this Court.