Fifita v Bailiff Officers [1999] TOLawRp 30; [1999] Tonga LR 158 (23 July 1999)

IN THE COURT OF APPEAL OF TONGA
Court of Appeal, Nuku’alofa

CA 21/99

Fifita

v

Bailiff Officers

Burchett, Tompkins, Beaumont JJ
16 July 1999; 23 July 1999

Sale of goods — vehicle seized under writ of distress — question of ownership of vehicle — when does property pass?
Creditors’ remedies — vehicle seized under writ of distress — question of ownership of vehicle

The appeal was concerned with questions of title to, and property in, a motor vehicle that arose in interpleader proceedings. The appellant agreed to sell a vehicle to the fourth respondent for the price of $8,987 (including insurance). After payment of a deposit of $3,500 there was a balance of $5,487 to be paid. Under the agreement the vehicle was registered and licenced in the appellant’s name and would remain so until the fourth respondent had paid the balance in full. The fourth respondent had possession of the vehicle upon the signing of the agreement and the payment of the deposit but was to return the vehicle to the appellant if the fourth respondent breached any part of the agreement. The fourth respondent paid the appellant some of the instalments due under the agreement, but then defaulted. By 19 September 1997, the fourth respondent was in default and owed the appellant $4,237. Meanwhile, the second, third and fourth respondents became involved in litigation in the Supreme Court in which the fourth respondent was ultimately the unsuccessful party. On 19 September 1997, the vehicle was seized by a Bailiff Officer under a Writ of Distress issued by order of the Supreme Court dated September 1997. The appellant gave notice of his claim to the vehicle (dated 25 September 1997) to judgment creditors (the second and third respondents). By their notice of dispute of claim dated 30 September 1997, the second and third respondents gave the appellant notice that they disputed his claim of title. On 6 July 1998, in a reserved judgment, the Judge made orders to this effect: the appellant’s claim was dismissed; the sale of the vehicle was directed to proceed; the Bailiffs’ costs were to be deducted from the proceeds of sale; the costs of the second and third respondents were also to be deducted from the proceeds; and the balance of the proceeds were to be paid to the fourth respondent. On 18 September 1998, the vehicle was sold by the Bailiffs pending a final court order (the Bailiffs held the net proceeds of sale, $2,850, in a Bank Term Deposit). The appellant appealed from the orders made at first instance on 6 July 1998.

Held:

1. The intention of the parties, as shown by the terms of the contract, the conduct of the parties and the circumstances of the case determine the time when the property in the goods was to be transferred.

2. The provisions of the agreement evinced an intention on the part of both the seller and the buyer that, unless and until the whole of the purchase price was paid, the seller was to retain the property in the goods, even if the buyer was to have possession so long as he performed the agreement.

3. The appeal was allowed and the orders at first instance were set aside. It was declared that, prior to its seizure and sale by the Bailiffs, the vehicle was the property of the appellant, who was entitled to the proceeds of its sale.

4. The Court ordered that the second and third respondents pay the costs of (i) the appellant and (ii) the Bailiffs of both the proceedings at first instance (including interlocutory proceedings) and on the appeal.

Cases considered:

‘Alatini v LDS Church [1990] TLR 1

Mitchell v Ede (1840) II Ad & El 888; 113 ER 651

Statutes considered:

Sale of Goods Act 1893 (UK)

Traffic Act CAP 99

Counsel for appellant : Mr Tu’utafaiva and Mrs Taufateau
Counsel for second and third respondents : Mr ‘Etika
Counsel for Bailiffs : Mr Malolo

Judgment

Introduction

This appeal is concerned with questions of title to, and property in, a motor vehicle arising in interpleader proceedings. The history of the matter follows.

By an agreement in writing dated 12 February 1997 (“the agreement”), Tevita Misa Fifita, the appellant, agreed to sell a motor vehicle (“the vehicle”) to Penisimani Vaka’uta, the fourth respondent, for the price of $8,600.00, together with the cost of insurance, $387.00, a total of $8,987.00. Payment by the fourth respondent of a deposit of $3,500.00 was acknowledged, thus leaving a balance of $5,487.00 to be paid (para 2 of the agreement).

The appellant then agreed:

“3. The (appellant) will register and licence the vehicle under it’s name until the (fourth respondent) will pay all the amount shown on the 2nd paragraph as the ‘Balance to be paid’

...

5. It will give the (fourth respondent) the vehicle after the (fourth respondent) pay for the Deposit shown on the 2^nd paragraph and when both parties signed the agreement of this agreement.

6. The (appellant) will make it possible and do some work to change the licence and the registration of the vehicle to the (fourth respondent) after the (fourth respondent) paid in full the ‘Balance to be paid’ as shown on the 2nd and 3rd paragraph.”

The fourth respondent then agreed:

“7. He/She will accept the vehicle and use it sensibly, take care and look after it properly until he/she paid off the ‘Balance to be paid’, to the (appellant) according to the payment procedure shown on the 8^th paragraph.

8. He/She will pay back the ‘Balance to be paid’ as such.

(a) First payment to be done on the day: Last week of March, 1997 which is $457.00.

(b) The continuation of payment will be for $457.00 in every month/two weeks/week until the amount for ‘Balance to be paid’ is paid in full. Give one (1) year to pay the rest.

...

10. He/She will return, without any dispution, the vehicle the (appellant) IF the (appellant) will contact him/her to return the vehicle to them because the (fourth respondent) breaks any section of this agreement.”

The vehicle was at the time of the agreement, and thereafter, registered in the name of the appellant, and a certificate of registration under the Traffic Regulations issued to the appellant.

The fourth respondent paid the appellant some of the instalments due under the agreement, but then defaulted. By 19 September 1997, the fourth respondent was in default and owed the appellant $4,237.00.

Meanwhile, the second, third and fourth respondents became involved in litigation in the Supreme Court in which the fourth respondent was ultimately the unsuccessful party.

On 19 September 1997, the vehicle was seized by a Bailiff Officer under a Writ of Distress (“the Writ”) issued by order of the Supreme Court dated September 1997. (At the time of the seizure, as has been noted, the balance owed by the fourth respondent to the appellant was $4,237). The Writ, in proceedings no 34 of 1997 between the fourth respondent as plaintiff and the second and third respondent as defendants, recited that on 20 May 1997, the second and third respondents had obtained judgment against the fourth respondent in the sum of $1,768.00, (being for costs on the dismissal of proceedings brought by the fourth respondent against the second and third respondents); and that this sum remained unpaid. The Writ commanded the Bailiff officers, unless the amount was paid, to seize the property of the fourth respondent (with some immaterial exceptions) and to sell that property by public auction until a sufficient sum was secured and to pay the proceeds of such sale to the Registrar of the Supreme Court; and if no property could be found, to certify to that effect to the Registrar of the Supreme Court.

By his notice to judgment creditors of a claim to goods taken in execution (dated 25 September 1997) the appellant gave the second and third respondents notice of his claim to the vehicle. By their notice of dispute of claim dated 30 September 1997, the second and third respondents gave the appellant notice that they disputed his claim of title.

The Bailiffs having interpleaded, the proceedings ultimately came before a Judge of the Supreme Court on 9 June 1998 for a final hearing of the issue of title to the vehicle, as between the appellant and the second and third respondents. (Several interlocutory orders were made in the interim, but they are not significant for present purposes).

On 6 July 1998, in a reserved judgment, the learned primary Judge made orders to this effect: (1) The appellant’s claim was dismissed. (2) The sale of the vehicle was directed to proceed. (3) The Bailiffs’ costs were to be deducted from the proceeds of sale. (4) The costs of the second and third respondents were also to be deducted from the proceeds. (5) The balance of the proceeds were to be paid to the fourth respondent.

On 18 September 1998, the vehicle was sold by the Bailiffs, who now hold the net proceeds of sale, viz $2,850, in a Bank Term Deposit, pending a final court order.

The appellant now appeals from the orders made at first instance on 6 July 1998.

The Reasoning at First Instance

The learned primary Judge first referred to some observations of Webster J in ‘Alatini v LDS Church [1990] TLR 1 at 2 on the effect of registration as evidence of ownership. (We will refer to these observations below).

The primary Judge then said:

“Now, what is the (fourth respondents) position? He has a contract with the (appellant), under which he paid part of the purchase price and on the same day took possession of the car. At that moment he had enforceable rights against the (appellant), which could be enforced only by action, and no longer by taking possession. For example, had the (appellant) then proceeded to purport to sell the car to another, the (fourth respondent) was entitled to come to court and have that stopped. In that sense, it was already his car. Since that time, he paid more and reduced the balance which the (appellant) is entitled to receive, and in return, his claim to ownership of the car strengthened. So long as he kept his side of the agreement and paid the instalments on time and in full, he would have become entitled to the legal ownership, or to damages, for which he could sue. It happens (I am told, but expressly do not find) that he has not kept up his payments, and that the (appellant) wished to exercise a right of repossession claimed under clause 10 of the written terms, only to find that the second and third respondents and the bailiff had got in first. Since that time the (fourth respondent) reduced the balance due by another $400. The Court does not know the effect of the subsequent payment. It cannot be said that the (appellant) has actually exercised a repossession right, nor is it established in the present proceedings that he has that right. There is no evidence about why the (fourth respondent) made no further payments after the $400 in October 1997, but it is reasonable to suppose that this is linked to the seizure of the car and its subsequent detention while the (appellant) tried to make good his claim. The vehicle has now been detained and unused for nine months. I am bound to treat the agreement as if it was being complied with and was in full effect at the time of seizure by the bailiff.

This means that the (fourth respondent) at that time was, and at the present time still is, vested with a chose in action, a right to sue the (appellant) for continued possession of the vehicle so long as the instalments continued. This chose in action is a right which he is entitled at law to assign to another, ie his interest in the vehicle is something he can sell. This interest is available to the (second and third respondents) in satisfaction of the debt due to them. For this reason, which rests on the merits of the (appellant’s) claim, I hold that the bailiff is entitled to seize the vehicle to satisfy the (fourth respondent’s) debt. ...

The (appellant) of course is free to bid for the vehicle at the public auction, and thus buy out the (fourth respondent). In the present proceedings I decline his claim, for the reason set out above.”

The Appellant’s Ground of Appeal

In essence, the appellant’s ground of appeal is that, at the time of seizure, the fourth respondent did not have any enforceable right of action against the appellant, and thus no title to the vehicle.

Conclusions on the Appeal

In our opinion, there is substantial force in the appeal.

The starting point for our consideration of the question of title to or property in, the vehicle, must be the terms of the written agreement between the appellant and the fourth respondent which bear upon the passing of property. We will analyse them below, against the background of English common law.

No Tongan Sale of Goods legislation was applicable to this transaction. However, this circumstance does not appear to be significant here. At common law, whether property passes depends upon the intention of the parties [see Mitchell v Ede (1840) II Ad & El 888; 113 ER 651]. For present purposes, the rules as to the passing of property under the English Sale of Goods Acts appear to be the same as those at common law: “The intention of the Sale of Goods Act 1893 (UK) was not to change but merely to codify the existing law relating to the sale of goods” (Halsbury’s Laws of England, 4th Ed, Vol 41 at 560). The general rule, both at common law and under the Sale of Goods Act, is as stated by Halsbury, op cit at 648:

“The intention of the parties, as shown by the terms of the contract, the conduct of the parties and the circumstances of the case determine the time when the property in the goods is to be transferred.”

Halsbury goes on to say (at 648 and 649):

“The parties may provide by their contract that although the buyer is entitled to possession of the goods, the property in the goods is not to pass until the price is paid ... A reservation of the legal title will normally prevent the goods from forming part of the general assets of the buyer in the event of his insolvency ...”

In our opinion, these statements of principle are applicable in all the circumstances of the present case. (We note, as Halsbury does (at 649(2)) that a buyer, acting wrongfully may yet give a good title on disposition to a third person acting in good faith. But that is not this case, since the fourth respondent did not attempt to dispose of the vehicle).

Turning then to the terms of the contract between seller and buyer, we find provisions to the following effect:

• The vehicle will be registered in the appellant’s name until payment of the balance of the purchase price (para 3). Upon this being paid, the vehicle will be registered in the name of the fourth respondent (para 6).

• The fourth respondent is to obtain possession of the vehicle upon the signing of the Agreement and payment of the deposit (para 5); but the fourth respondent will return the vehicle to the appellant if the fourth respondent breaches any part of the Agreement (para 10).

• The fourth respondent will take care of the vehicle until he pays the balance purchase price (para 7).

• The fourth respondent will pay the balance by instalments (para 8).

In our view, these provisions, read as a whole, evince an intention on the part of both the seller and the buyer that, unless and until the whole of the purchase price is paid, the seller is to retain the property in the goods, even if the buyer is to have possession so long as he performs the agreement.

There is nothing in ‘Alatini, above, which contradicts this. On the contrary, it is consistent with our conclusion. Webster J there said (at 2):

“The Traffic Act (CAP 99) Part II is written on the basis that a vehicle is registered by the owner and that a change in ownership requires a change in registration. While Inspector Faletau on behalf of the Police submitted that, in terms of section 11, registration should be conclusive for all matters, in the absence of definite words in the Act the contents of the Register of Motor Vehicles only carry a strong presumption that they tell the true state of affairs. In the absence of evidence to the contrary the contents will be upheld, but can be displaced by such contrary evidence, as in this case.”

Here, the registration was consistent with the parties’ intention that, until payment in full, the appellant retained the property in the vehicle. If anything, the presumption of regularity arising from registration only serves to reinforce the parties’ actual intention to ensure that, unless and until the balance of the price was paid, the appellant was to retain title.

It further follows that, at the time of the Bailiff’s seizure of the vehicle, it was the appellant’s property; furthermore, the appellant had a contractual right to resume possession of the vehicle. That is to say, at the time of seizure, the fourth respondent had no property in the vehicle which the Bailiff could seize under the Writ of Distress as the property of the fourth respondent.

For completeness, although the question does not arise here, we might add that the only right that the fourth respondent might possibly have asserted as a buyer would be (if there were appropriate circumstances) to seek equitable relief against the forfeiture of the deposit and instalments already paid. But this relief can only be granted where the seller’s conduct is unconscionable (see Chitty on Contracts, 26th Ed, Vol 11 at 652 and 653). There is no suggestion of this here, where the appellant has, it appears, suffered a loss overall on the transaction. In any event, if a remedy by way of execution were to be available to the second and third respondents, it would be by way of attachment or garnishee of a debt (being the claim for relief against forfeiture) rather than a writ of distress levied against the (tangible) proper of the fourth respondent.

The appeal must be allowed and the orders at first instance set aside. In lieu thereof, it should be declared that, prior to its seizure and sale by the Bailiffs, the vehicle was the property of the appellant, who is now entitled to the proceeds of its sale.

As to the appellant’s costs, the second and third respondents must pay these at first instance (including any costs incurred by the appellant in the interlocutory proceedings) and on the appeal. The fourth respondent has incurred no costs, not having appeared in the proceedings at any stage.

As to the Bailiffs’ costs, Mr Malolo has drawn our attention to the following statement of English practice in the Supreme Court Practice, the White Book, [1997] Vol 1 at 287:

“As a general rule, in a sheriff’s interpleader, where the claimant fails, the sheriff is entitled to his costs (including possession money) from the time of the notice of claim or from the sale, whichever be the earlier. Where the claimant succeeds, the sheriff is entitled as against the execution creditor to costs from the time when the latter authorised the interpleader proceedings - i.e., generally from the return of the interpleader summons. But in either case the sheriff gets his costs from the execution creditor, who (if successful) obtains a remedy over against the claimant. Similarly a successful claimant gets his costs against the execution creditor from the return of the interpleader summons.”

This practice is, we think, appropriate for adoption in Tonga. Accordingly, we propose to order that the second and third respondents pay the Bailiffs’ costs, both below and before us.

Orders on the Appeal

We make the following orders:

(1) Appeal allowed.

(2) Set aside the orders made at first instance on 6 July 1998.

In lieu thereof make the following orders:

(a) Declare that, prior to its seizure and sale by the Bailiffs, the appellant had the property in the subject vehicle; and that, accordingly, the appellant is now entitled to its net proceeds of sale.

(b) Direct the Registrar of the Supreme Court to pay to the appellant the sum of $2,850 standing to the credit of the Term Deposit Account, together with any accrued interest.

(c) Order that the second and third respondents pay the costs of (i) the appellant and (ii) the Bailiffs of both the proceedings at first instance (including interlocutory proceedings) and on the appeal.