Fadallah v Pollak

Under the Sale of Goods Act 1979, contractual terms governing when property passes are decisive where the parties have agreed that title is retained until payment. The statutory exceptions protecting good-faith purchasers do not assist where the intermediary obtained possession only as bailee after an earlier sale, rather than as seller. For s.24, the relevant question is the capacity in which the first seller obtained physical possession before the later sale. For s.25(1), the buyer must have obtained possession with the seller’s consent and the relevant delivery or transfer must occur after the buyer bought or agreed to buy the goods.

The claimant paid Eagle Power Ltd £110,000 for two generating sets. Eagle had previously acquired title to the sets from the defendant, subject to the defendant’s retention-of-title terms, and had stored them at its premises. The defendant later agreed to sell the sets to Eagle, but Eagle never paid and title therefore did not pass. Eagle subsequently entered liquidation.

The claimant sought delivery of the sets or their value, relying on the Factors Act 1889 and sections 21, 24 and 25(1) of the Sale of Goods Act 1979. The issues were whether Eagle had acted as the defendant’s mercantile agent, whether title had later fed through to the claimant, and whether either statutory exception applied.

1. Claim dismissed. Eagle was not the owner when it sold the generating sets to the claimant. The claimant therefore acquired no better title unless one of the statutory exceptions applied.
2. Under s.2(1) of the Factors Act 1889, the intermediary must be a mercantile agent appointed to act on behalf of the owner. Eagle’s business was buying and selling generating equipment. It had never acted as the defendant’s agent, so this exception failed.
3. The defendant’s contract with Eagle incorporated the defendant’s standard retention-of-title terms. Under sections 17 and 18 of the Sale of Goods Act 1979, the parties’ contractual provision as to when property passes was decisive. Eagle never paid the price, and the contract was later discharged by mutual agreement. Title therefore never passed to Eagle.
4. Section 24 did not apply. Eagle obtained physical possession only after title had passed to the defendant and after the defendant had taken possession. Eagle received the sets as a gratuitous bailee, not as seller. Applying the distinction explained in Mitchell v Jones and considered in Pacific Motor Auctions Pty. Ltd. v Motor Credits (Hire Finance) Ltd., the section depends on the capacity in which the first seller obtained possession.
5. There was also no qualifying delivery or transfer by Eagle to the claimant for purposes of section 24 beyond the assumed constructive delivery on payment. The claimant’s reliance on section 25(1) consequently failed because Eagle had possession before its later agreement with the defendant and constructive delivery to the claimant occurred before that agreement. The claimant could not adopt inconsistent positions on delivery under sections 24 and 25(1).
6. The reasoning in Butterworth v Kingsway Motors Ltd. did not assist because, on the facts, Eagle never obtained title capable of feeding the title intended to pass to the claimant. The approach to delivery in Michael Gerson (Leasing) Ltd. v Wilkinson supported the conclusion that possession may be delivered constructively, but did not overcome the statutory timing and capacity requirements.