Csolle (trading as Lodi Timber Co) v ASP (NG) Ltd [1967] PGSC 10; [1967-68] PNGLR 301 (21 March 1968)

Papua New Guinea Law Reports - 1967-68

[1967-68] PNGLR 301 - Csolle (trading as Lodi Timber Co.) v A.S.P. (N.G.) Ltd.

[1967-68] PNGLR 301

PAPUA NEW GUINEA

[SUPREME COURT OF JUSTICE]

CSOLLE (TRADING AS LODI TIMBER CO)

V

A.S.P. (N.G.) LTD

Rabaul

Clarkson J

21 March 1968

APPEAL - Judgment entered for reasons wrong in law - Claim and counterclaim not properly pleaded - Judgment for similar sum due on application of correct principle - No substantial miscarriage of justice - District Courts Ordinance, s. 236(2).

SALE OF GOODS - Redelivery to vendor for repair - Bailment - Resale by vendor - Remedies of buyer and seller - Rescission of contract by abandonment of goods - Goods Ordinance 1951, s. 52(3).

The respondent sold to the appellant on credit a motor-driven saw of which the appellant took delivery. About a fortnight later the appellant returned the saw which was then unserviceable to the respondent requesting that it be repaired at the latter’s expense. The respondent accepted the saw but said the nature of the fault would have to be ascertained before liability for the cost of repairs could be accepted. The parties failed to reach agreement on liability for the cost of repairs and the appellant obtained a replacement saw from another source. About nine months after the original sale the respondent without prior notice to the appellant repaired the saw and resold it for a lesser sum than the original purchase price. The respondent then sued the appellant for the original purchase price but during the trial reduced its claim by giving credit for the amount of the resale price less the cost of repairs and substituted a fresh claim for damages for breach of contract in lieu of the original claim in debt. The magistrate found that the appellant was not entitled under the terms of any warranty to have the saw repaired at the respondent’s expense and awarded the respondent damages on the basis that in reselling the saw it was exercising its rights as an unpaid seller under s. 52(3) of the Goods Ordinance 1951.

On appeal,

Held:

N1>(1)      Upon the delivery of the saw to the appellant the respondent’s only remedy was in action for the price of the goods.

Gallagher v. Shilcock, [1949] 2 K.B. 765; [1949] 1 All. E.R. 921, referred to.

N1>(2)      Upon the return of the saw by the appellant the respondent did not become an unpaid vendor still in possession of goods sold and could not therefore assert the right of resale conferred by s. 52(3) of the Goods Ordinance 1951. The respondent became a bailee of the saw, and the fact that there was no agreement on its repair did not prevent a bailment arising.

Pacific Motor Auctions Pty. Ltd. v. Motor Credits (Hire Finance) Ltd. [1965] UKPCHCA 1; (1965), 112 C.L.R. 192, compared.

N1>(3)      The respondent’s right to sue for the price of the saw was not suspended because it became a bailee or because it later resold the saw although such resale could have given rise to a counterclaim by the appellant for damages for conversion.

N1>(4)      There was a possibility that the contract had been rescinded by the appellant’s abandoning the saw to the respondent and the respondent’s acceptance of such abandonment and in that case the respondent would have been entitled to claim damages measured by the loss on resale (Commission Car Sales (Hastings) Ltd. v. Saul, [1957] N.Z.L.R. 144).

N1>(5)      As the net amount recoverable by the respondent either in an action for the price followed by a counterclaim for damages for conversion or in an action for damages after rescission of the contract would have been approximately the same as the amount actually awarded to the respondent by the magistrate there had been no substantial miscarriage of justice within the meaning of s. 236(2) of the District Courts Ordinance 1963.

Appeal.

A.S.P. (N.G.) Ltd. commenced an action against M. Csolle (trading as Lodi Timber Co.) for the purchase price of a motor-driven saw sold on credit. During the hearing in the District Court at Rabaul the plaintiff substituted a claim for damages for breach of contract. The District Court awarded the plaintiff $214.60 damages under s. 52(3) of the Goods Ordinance 1951. From this judgment the defendant appealed to the Supreme Court on the ground that the magistrate’s decision was wrong in law. The relevant facts appear in the headnote and the reasons hereafter.

Counsel:

Hickey, for the appellant.

Thornton, for the respondent.

21 March 1968

CLARKSON J:  This is an appeal from a judgment of the District Court at Rabaul awarding damages and costs against the appellant for breach of contract.

The claim arose from the sale of a motor-driven saw by the respondent vendor on credit to the purchaser. The price was payable at the end of the month in which the sale was effected but immediate delivery was given to the purchaser.

About a fortnight later the purchaser brought the saw which was then unserviceable to the vendor and requested that the necessary repairs be carried out at the vendor’s expense. The vendor accepted the saw but said he would have to ascertain the nature of the fault before accepting liability for repairs. Subsequently a dispute arose between the parties whether the cost of repairs should be borne by the vendor or the purchaser. No finality was reached and the saw remained, unrepaired, in the possession of the vendor.

That situation continued for approximately nine months during which period there was little communication between the parties and the purchaser obtained a replacement saw from another source.

Ultimately the vendor without any notice to the purchase repaired the saw and resold it for a lesser sum. The figure agreed by counsel at the hearing of the appeal were as follows:

Original purchase price of saw	$331.50
Cost of repairs	$153.40
Resale price after repair	$269.80

The nett loss to the vendor was $215.10 and judgment was entered in the vendor’s favour for $214.60, showing a small difference which I disregard.

Originally the vendor sued the purchaser for the full purchase price and the purchaser merely gave notice of defence. During the trial the vendor reduced the claim by giving credit for the amount of the resale price less the cost of repairs and later at the trial the vendor further amended, or perhaps more accurately substituted a fresh cause of action, by setting up a claim for damages for breach of contract in place of the original claim in debt.

The magistrate found that the claim by the purchaser that the saw should be repaired under the terms of a warranty contained in the original contract of sale could not be sustained. He upheld the vendor’s claim on the basis that the vendor had properly exercised a right of sale under s. 52(3) of the Goods Ordinance 1951 which is identical with s. 48(3) of the Sale of Goods Act, 1893 of England which statute has been substantially reproduced in the Goods Ordinance and in enactments in New Zealand and the Australian States. This subsection provides:

“Where the goods are of a perishable nature or where the unpaid seller gives notice to the buyer of his intention to resell and the buyer does not within a reasonable time pay or tender the price the unpaid seller may resell the goods and recover from the original buyer damages for any loss occasioned by his breach of contract.”

The vendor had admittedly given no notice to the purchaser before the resale but the learned magistrate accepted the vendor’s argument that the machine sold was “of a perishable nature”, and gave judgment for the plaintiff on the amended claim.

Against this judgment the defendant now appeals on the ground merely that the magistrate’s decision was wrong in law.

The facts as found by the magistrate are not challenged before me and I now return to them and to a consideration of the legal consequences.

The sale was an outright sale on credit of a specific article which had been examined, tested and then and there delivered to the purchaser and no special provision had been made preventing the property in the chattel passing to the purchaser. In these circumstances it is clear that when the purchaser left the vendor’s premises in possession of the saw the property in it had passed to the purchaser and it was at his risk (see the Goods Ordinance, ss. 22 to 25). In addition, he had the right to possession of it and in fact had possession. It remained for the purchaser to pay the purchase price on the due date which he did not do.

At that stage by reason of s.53 of the Goods Ordinance the vendor could have maintained an action for the price of the goods and this in my view was his only remedy. The position is clearly stated in Benjamin on Sale, 7th ed., p. 864, as follows:

“Whenever the property has passed and the goods have reached the actual possession of the buyer, the seller’s sole remedy is by personal action. He stands in the position of any other creditor to whom the buyer may owe a debt; all special remedies in his favour qua seller are gone. By the law of England, in this respect agreeing with the civil law, mere delay by the buyer in paying the price will not justify the rescission of the contract by the seller, unless the right to rescind be expressly reserved.”

This rule accords with the common law which the Sale of Goods Act codified and the passage I have quoted was adopted by Finnemore J. in Gallagher v. Shilcock[ccclxxviii]¹ and is also repeated in the 8th ed. of Benjamin, at p. 829, which work that learned judge edited.

If the facts stopped with the purchaser in possession of the saw and defaulting in payment I would have no doubt that the plaintiff’s only remedy was to sue for the price of the saw as indeed he originally did. However, about a fortnight after the sale the saw again came into the possession of the vendor when the purchaser brought it to him for repair and thereafter the saw remained in the vendor’s possession until the vendor, having found another buyer, repaired the saw and sold it. It is the significance of these latter events, which occurred after the sale, which appear to have occupied a great deal of time in the court below.

The vendor’s argument briefly was that the redelivery of the saw to him restored him to the position of an unpaid vendor still in possession of the goods sold. From this he argued that he had a right to resell under s. 52(3) of the Goods Ordinance and since he had purported to resell without prior notice to the purchaser he was obliged to argue further that the saw was of a perishable nature.

The purchaser’s contention was that the saw was not of a perishable nature and that in any event the vendor could not rely on s. 52(3) because he had long since ceased to be an unpaid vendor in possession of the goods sold and that on the return to the vendor of the saw for repair he became merely a bailee with certain obligations to take reasonable care of the saw but with no power to sell it.

Even if this argument of the purchaser were sound it did not meet the fact that the vendor had not been paid for the saw. In the lower court the purchaser did not suggest that the contract of sale had been rescinded but set up that the vendor’s rights under the Contract of sale, whatever these might be, had been suspended by the creation of the bailment which still continued at the time of the resale.

I am satisfied that neither of the opposing arguments provides a solution to the problem which had arisen.

I accept the first part of the purchaser’s argument that when the vendor gave possession of the saw to the purchaser the vendor ceased to be an unpaid vendor in possession. As I have already indicated the vendor became a creditor for the price of the saw. I also agree that when the vendor regained possession he did so not as vendor but as bailee.

The learned magistrate found some difficulty in accepting that the vendor held as bailee, apparently because there was no agreement that the saw should be repaired, but such an agreement was not necessary before a bailment could arise. Originally at least the purchaser clearly intended to leave the saw with the vendor for repair and the vendor in fact accepted it and took it into his custody. The vendor was then in a position similar to that of any repairer who accepts an article to hold until he receives instructions for its repair but who has not yet received those instructions. There was at least a bailment of the type commonly referred to as a deposit and the vendor was under an obligation not to use the saw nor otherwise convert it to his own use. See Halsbury’s Laws of England, 3rd ed., vol 2, pp. 96-99.

The learned magistrate referred to a line of cases the last of which was Pacific Motor Auctions Pty. Ltd. v. Motor Credits (Hire Finance) Ltd.[ccclxxix]². These cases are directly concerned with the equivalent of s. 30(1) of the Goods Ordinance which protects the position of an innocent second purchaser where a seller “having sold goods continues or is in possession of the goods” and then purports to sell them again. The Judicial Committee in the Pacific Motor Auctions case has authoritatively stated that the section does not apply where after the first sale there has been a break in the continuity of the vendor’s physical possession. It is true that this decision is concerned with another section and does not deal specifically with the present problem. But it clearly supports the purchaser’s contention that after the return of the saw to the vendor the vendor held it not as an unpaid vendor in possession but as bailee and the importance of this is that the vendor’s power of resale under s. 52(3) which it was sought to show he had exercised is available only to an unpaid vendor who is still in possession of the goods. At the time of the second sale the vendor did not come within that description. He had parted with possession as an unpaid vendor and subsequently resumed possession as a bailee with no right of resale. His simple remedy as I have indicated was to sue for the full purchase price.

Even if s. 52(3) conferred a power which could be exercised by the vendor after he had given possession to the purchaser he admittedly did not give the required statutory notice and if it were necessary for me to decide the point I would have great difficulty in accepting the proposition that the saw was “of a perishable nature”.

The context in which the phrase is used would indicate that it applies only to goods which are likely to deteriorate so rapidly that the delay involved in giving notice would result in unnecessary loss and that was not the position here. But in any event counsel was unable to refer me to any case where the description has been applied to other than goods such as consumables, and to include within the statutory description a mechanical saw presumably sold as fit for service in the tropics seems to me to give the description an area of meaning greater than that intended.

The vendor having failed to bring himself within s. 52(3) the next step is to consider the legal situation which existed after the purported resale. Again I refer to Benjamin, 8th ed., p. 948:

“Having now discussed the law where the seller resells before delivery, we come to the case of a resale by him after he has delivered the goods. Where an unpaid seller, after delivery of the goods to the buyer, the property having passed, tortiously retakes and resells them, the law is well settled that the contract is not rescinded, and the seller may still recover the price, while the buyer may maintain an action in trover for the conversion. In these cases neither party can set up his own right as a defence in an action by the other, but must bring his cross action or set up a counterclaim.”

Further at pp. 951-952 the position is summarized as follows:

N2>“1.      A seizure and resale of the goods by the seller after delivery is tortious, and the buyer, even if he have committed a breach of contract, may sue the seller for conversion or in trespass or detinue, and may recover as damages the full value of the goods. In such action the seller cannot set off the unpaid price, but may sue or counterclaim for it.

N2>2.       Such resale cannot be treated by the buyer as a rescission of the contract. Accordingly he cannot recover back any part of the price paid, or refuse to pay the remainder of it or the whole price, as the case may be, when due.”

I have indicated why I cannot accept the vendor’s contentions and have said that I accept the first part of the purchaser’s argument but I cannot accept the subsequent proposition that because the vendor became a bailee somehow his right as unpaid vendor to sue for the purchase price was suspended. I can find no support for this proposition which appears to me to be contrary to the authorities. I cannot see why either the fact that the saw was in the possession of the vendor as bailee nor the fact that no agreement for its repair had been reached in any way diminishes the vendor’s right to sue for and to recover the purchase price. Nor can I see that his action in reselling the saw affects his cause of action although of course it may well give rise to a cause of action against him.

It is also clear that whatever his rights the vendor was not entitled to deal with the saw unless the contract for sale had been rescinded and by so doing he would make himself liable in damages to the purchaser for conversion. The measure of these damages would be the value of the saw at the time of the conversion. Whether the conversion occurred when the plaintiff, having obtained a prospective purchaser, commenced to repair intending to resell or whether it occurred at the time of resale after repair is immaterial. In the first case the measure of damages is the run-down value of the saw and in the second the vendor would be entitled to credit for the value of his work and labour expended in increasing the value of the saw, and in the present case on the evidence the result would be the same.

The true position of the parties almost certainly was that the vendor had a good cause of action for the full purchase price and the purchaser had a good counterclaim for the run-down value of the saw. The final result should then have been that the vendor, after allowing for the counterclaim, would have recovered a sum approximating that for which he has obtained judgment.

A further possibility arose during the hearing of the appeal, namely that there had in fact been a rescission of the contract of sale effected by the purchaser abandoning the saw to the vendor when the vendor refused to repair it at his own expense and by the vendor’s accepting the abandonment. In such a case the vendor would have a claim for damages measured by the loss on resale. Again the vendor’s judgment would have been for the sum for which judgment was in fact finally entered.

There is some support for this view of the facts in the plaintiff’s failure to do anything about the saw and in his purchase of a replacement and in the vendor’s evidence that he “took it he (the purchaser) was leaving it with us in partial discharge of the debt”. If in fact the contract was rescinded then the vendor’s claim would be in damages (see Commission Car Sales (Hastings) Ltd. v. Saul[ccclxxx]³). I have already noted that this construction of the facts raised in argument on the appeal was not raised in the lower court.

The position which arises then is a peculiar one. The vendor had a good claim for the full purchase price which be originally set up and then abandoned. The purchaser had a good counter-claim for damages which he did not set up. Alternatively, the vendor may have had a good claim for damages on the basis that the contract had been rescinded but ultimately the action was fought on neither of these bases. The vendor shifted his ground to rely on s. 52(3) of the Goods Ordinance, a ground which was strictly untenable because he had parted with possession of the saw. I should add that the vendor got himself into this difficulty only because he considered it right that the purchaser who had not counter-claimed should receive credit for the resale value of the saw less the cost of repairs. The problem which now arises is how the matter should be resolved in this Court.

Whether the contract was rescinded or not the vendor was in my view entitled to recover an amount approximately equal to that for which he has recovered judgment but he was not entitled to judgment on the cause of action on which he ultimately succeeded. In this situation merely to allow the appeal would cause an injustice to the vendor. To remit the matter to the District Court would no doubt give an opportunity for the pleadings to be amended to proper form but the final result would not change substantially and the parties would incur substantial additional costs.

Section 236(2) of the District Courts Ordinance provides that an appeal should be allowed only if it appears that there has been a substantial miscarriage of justice. For the reasons I have given the learned magistrate was wrong in holding that s. 52(3) of the Goods Ordinance applied to the present case but if the case had been pleaded and presented on the basis which I think was the proper one he should have reached substantially the same result as he did.

In these circumstances no substantial miscarriage of justice appears to me to have occurred and the appeal will be dismissed.

I will hear submissions as to the costs of the appeal.

Appeal dismissed. No order as to costs.

Solicitors for the appellant: P. G. Lefevre, Hickey & Co.

Solicitor for the respondent: F. N. Warner Shand.

[ccclxxviii] [1949] 1 All E.R. 921, at p. 922. Over-ruled on another point. R.V. Ward Ltd v. Bignall [1967] 1 Q.B. 534.

[ccclxxix](1965) 112 C.L.R. 192.

[ccclxxx] [1957] N.Z.L.R. 144.