The seller had supplied diesel engines to the buyer under contracts which preserved, under a retention of title clause, the seller's title to the engines until full payment of the price. It was contemplated that the buyer would incorporate the engines into generating sets, which would be sold to customers (sub buyers) with the engines unaltered in substance. On 6 November 1980 the buyer went into receivership, having an overdraft of £728,435 with a bank, which held a charge on their assets. On 17 November 1980 the seller, who had not been paid for the engines, successfully applied for an interim injunction restraining the buyer from purporting to sell or parting with possession of the engines. Of three generating sets then on the buyer's premises, two were in a deliverable state and their serial numbers had been communicated to the sub buyers. The third set, for which the sub buyers subsequently paid £1,236.82, was not in a deliverable state.
On the seller's claim for the proceeds of sale by the buyers of the three engines amounting to £28,988.01.
Held 1. That the property in the generating sets which were in a deliverable state before 17 November 1980 passed to the sub buyers before that date but the property in the other set did not pass before that date; that, therefore, the seller had had a valid proprietary claim to retake the engine in the latter set only which had subsequently been delivered to the sub buyers, and that claim had been transformed into a claim against the proceeds of sale.
2. That since it could not be implied from the terms of the agreement between the parties that the buyer occupied a fiduciary position in relation to the proceeds of sale, the seller did not have a direct claim for the proceeds of sale of the engines and, accordingly, were only entitled to payment of £1,236.82 and interest thereon in respect of the one engine out of the joint deposit account.