Pacific Motor Auctions Pty Ltd v Motor Credits (Hire Finance) Ltd

 

[1965] A.C. 867

 

Privy Council

 

NB The s. 28 (1) referred to below is s.28 Sale of Goods Act, 1923 (New South Wales). It is identical with section 25 (1) of the English Sale of Goods Act, 1893.

 

Lord Pearce

 

'The point under section 28(1) turns on the construction of the words "where a person having sold goods continues or is in possession of the goods." Are those words to be construed in their full sense so that wherever a person is found to be in possession of goods which he has previously sold he can, whatever be the capacity in which he has possession, pass a good title? Or is some, and if so what, limitation to be placed on them by considering the quality and title of the seller's possession at the time when he sells them again to an innocent purchaser?

 

… Section 28 (1) is not limited to any particular class of seller; it applies to a purchase from any kind of seller made in good faith and without notice of the previous sale.

 

… There is thus no case which holds that the section does not apply where after the sale the seller simply attorns to the buyer and holds the goods as his bailee.

 

It is plainly right to read the section as inapplicable to cases where there has been a break in the continuity of the physical possession… But what is the justification for saying that a person does not continue in possession where his physical possession does continue although the title under or by virtue of which he is in possession has changed? The fact that a person having sold goods is described as continuing in possession would seem to indicate that the section is not contemplating as relevant a change in the legal title under which he possesses. For the legal title by which he is in possession cannot continue. Before the sale he is in possession as an owner, whereas after the sale he is in possession as a bailee holding goods for the new owner. The possession continues unchanged but the title under which he possesses has changed. One may, perhaps, say in loose terms that a person having sold goods continues in possession as long as he is holding because of and only because of the sale; but what justification is there for imposing such an elaborate and artificial construction on the natural meaning of the words? 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. Where a vendor retains uninterrupted physical possession of the goods why should an unknown arrangement, which substitutes a bailment for ownership, disentitle the innocent purchaser to protection from a danger which is just as great as that from which the section is admittedly intended to protect him?

 

… There is therefore the strongest reason for supposing that the words "continues in possession" were intended to refer to the continuity of physical possession regardless of any private transactions between the seller and purchaser which might alter the legal title under which the possession was held.'