Online Catering Ltd v Acton & Anor

The Court of Appeal dismissed the appellant's challenge to the Recorder's finding that the claimant company had agreed terms of business containing a contractual right permitting the garage to take possession of vehicles for unpaid invoices. The principal legal issue was whether that contractual possessory licence amounted to a "bill of sale" within the Bills of Sale Acts and thus unenforceable for want of registration. The court held that the Bills of Sale Acts apply to individuals and not to companies; company security interests are governed by the Companies Act regime (Part XII of the Companies Act 1985) so the Bills of Sale Acts did not render the contract void. The Recorder's factual findings (incorporation of terms, existence of indebtedness and rejection of the claimant's evidence) were upheld and the additional grounds advanced on appeal were refused permission.

Background and facts:

• The claimant, Online Catering Ltd, operated a fleet of delivery vehicles and sued for the return or value of two vans allegedly wrongfully taken by Drakeglen Ltd (trading as Metropolitan Fleet Services) and its managing director, Mr Acton, together with consequential and exemplary damages.
• Drakeglen had carried out repairs and invoiced the claimant; correspondence established an outstanding balance of £11,772.62. On 4 April 2008 Mr Acton and others removed two vans from the claimant's premises after falsely representing that they were being taken for repair. The defendants refused to return the vehicles and offered to release them only on payment.
• The defendants relied on their printed Terms of Business, said to have been incorporated into the contract, in particular clause 28(b) which permitted them to obtain goods to the value of unpaid sums.

Procedural history:

• The Recorder at Central London County Court dismissed the claim but granted permission to appeal on the single issue whether the contract was a bill of sale and unenforceable for non-registration.
• The claimant sought permission to advance additional grounds (procedural requirements akin to distress for rent, perversity of factual findings and non-incorporation of clause 28(b)), but the Court of Appeal refused permission on those points as having no real prospect of success.

Issues framed:

• Whether the contractual power to take possession of the vans constituted a "bill of sale" within the Bills of Sale Act 1878 (and related 1882 Act) and therefore required registration.
• If so, whether non-registration rendered the contract unenforceable as between the parties.

Reasoning and decision:

• The Court analysed section 4 of the Bills of Sale Act 1878 and concluded the clause in question, insofar as it authorised possession of chattels as security for a debt, would fall within the definition of a bill of sale if the grantor were an individual.
• However, after review of authority (including Read v Joannon; Standard Manufacturing; Clark v Balm, Hill & Co; and N.V. Slavenburg’s Bank) the court concluded the Bills of Sale Acts operate in practice in respect of individuals and not companies. The Companies Act regime (Part XII, sections 395 and 396 of the Companies Act 1985) provides the statutory framework for registration of company charges; that regime, and the historical and textual indicators, supported the conclusion that the Bills of Sale Acts do not apply to companies.
• Accordingly the Recorder was in error to treat the contract as a bill of sale falling within the Bills of Sale Acts, and the appeal on that ground failed. Even on hypothetical analysis, failure to register under the Bills of Sale Acts would not have assisted the claimant because non-registration under the Companies Act is only effective against liquidators, administrators and creditors.
• The Recorder's factual findings (incorporation of the terms, unpaid sums and the rejection of the claimant's evidence) were upheld and the appeal was dismissed.

Other observations:

• The court noted, but did not decide, that the defendants obtained possession by deceit; no point was taken below on the manner of obtaining possession and the court did not adjudicate on whether that method made the seizure wrongful.

Appeal dismissed. The Court of Appeal held that although the contractual clause authorised taking possession of chattels as security and would amount to a bill of sale if made by an individual, the Bills of Sale Acts apply to individuals rather than companies. Company security interests fall within the Companies Act registration regime (Part XII), so the Bills of Sale Acts did not render the agreement unenforceable between the company parties. The Recorder's factual findings and incorporation of the terms were upheld.

Appeal from the Central London County Court (Recorder Mr Paul de la Piquerie), judgment at first instance dated 4 November 2008; appeal heard in the Court of Appeal (Civil Division), neutral citation [2010] EWCA Civ 58.