Fadallah v Pollak

On any view the circumstances giving rise to this action were unfortunate. What caused the commencement of the action was, essentially, the going into creditors’ voluntary liquidation on 1 November 2011 of a company called Eagle Power Ltd. (“Eagle”). It appears that, before it went into liquidation, Eagle had agreed to sell to the claimant, Mr. Tahir Fadallah, two 1270 kVA second-hand Cummins KTA50G3 diesel generating sets, with the respective serial numbers 33116392 and 33116400 (“the Generating Sets”), for the sum of £110,000. Mr. Fadallah, or a company of which he appears to be a director called Tahir Guest Palace Ltd., seems to own and operate an hotel called Tahir Guest Palace (“the Hotel”) situate near Kano in Nigeria. In his witness statements dated, respectively, 25 November 2011 and 15 March 2013, made for the purposes of this action Mr. Fadallah asserted, in paragraphs 4 of each, that he owned and ran the Hotel. However, in stationery used in the business of the Hotel copies of which were adduced in evidence there appeared at the foot the name “Tahir Guest Palace Ltd.”, followed by the name of two directors, Mr. Tahir Fadallah and Mr. Mohammed Fadallah. No point has been taken in this action as to whether Mr. Tahir Fadallah in his personal capacity is the correct claimant, so it is unnecessary to consider that matter further. The case of Mr. Fadallah was that he had agreed to purchase the Generating Sets for use for the purposes of the Hotel, that he had paid the agreed price, but had not received delivery of the Generating Sets, which, by the date of the commencement of this action, were under the control of the defendant, Mr. John Pollak. Mr. Pollak carries on business under the style or title “JMP Developments” as a dealer in new and used electrical generators. In essence the case of Mr. Pollak was that, at the time Eagle purported to enter into an agreement to sell the Generating Sets to Mr. Fadallah, the Generating Sets did not belong to Eagle, but to him. Mr. Pollak accepts that, on or about 30 August 2011, he did agree to sell the Generating Sets to Eagle for the sum of £120,000, but on terms that property in the Generating Sets was to remain in him unless and until he was paid, and he never was. In this action it was contended on behalf of Mr. Fadallah that, in the circumstances, Mr. Fadallah was entitled as against Mr. Pollak to delivery up of the Generating Sets or to payment of the value of them, which, it was contended, was what Mr. Fadallah had paid for them. On behalf of Mr. Pollak those contentions were disputed. I do not think that there was any dispute before me both that Mr. Fadallah had caused payment to be made to Eagle for the price agreed for the Generating Sets of £110,000, and that Mr. Pollak had not been paid by Eagle the price at which he had agreed to sell the Generating Sets to Eagle. The consequence of the liquidation of Eagle thus was that one or other of otherwise innocent parties had sustained loss. Either Mr. Fadallah would get nothing for the payments totalling £110,000 which had been made, or Mr. Pollak would be required to deliver up to Mr. Fadallah the Generating Sets for which Mr. Pollak had not been paid.

The answer to the question who was to sustain a loss depended, as it seemed to me, simply on the application of established principles of English law to the facts which I found were the material facts of the present case. At one level the purpose of the English law of contract, and more specifically in the present case, of sale of goods, is to provide a mechanism to resolve problems of exactly the type which arose in the present case.

There was little dispute as to the essential facts of this case, and it is convenient to rehearse what was not in dispute before turning to those matters which required decision by me.

Mr. Pollak and Eagle had had dealings over many years – as I understand it, eighteen – prior to the events giving rise to the claims made in this action. Those dealings, it was common ground between Mr. Pollak and Mr. Nissr Nijim, formerly managing director of Eagle, had taken place on the standard terms and conditions of Mr. Pollak (“the Pollak Terms”), which included, at condition 6(b):-

“Title in the goods remains vested in the Company [defined as “JMP Developments”] and shall only pass from the Company to the Customer upon full payment being made by the Customer of all sums due on whatsoever account or grounds to the Company.”

At the end of March 2011 Mr. Nijim telephoned Mr. Pollak and notified him that Eagle was in a position to offer for sale five generating sets, including the Generating Sets, which were then physically located at premises belonging to J.P. Morgan at Chaseside, Bournemouth. Mr. Pollak went to inspect the five generating sets. Then, following discussion with Mr. Nijim, Mr. Pollak wrote him a letter dated 5 April 2011 which was, so far as presently material, in the following terms:-

“Re: Acquisition of 5 x Cummins Gensets from JP Morgan – Bournemouth

I refer to our recent discussions regarding the diesel generating sets currently located at the JP Morgan office complex at Chaseside, Bournemouth.

The engine and alternator serial numbers of the machines are as follows:-

[They were then set out.]

In addition to the above machines, all ancillary equipment including control panels, synchronising panels, switchgear, fuel tanks, fuel pumps, exhaust silencers form an integral part of the acquisition agreement.

The agreed purchase price for the above is £150,000.00.

It is formally agreed that the principle contract condition is that JMP Developments will receive Full Title of ownership of these machines upon payment of the deposit.

Disconnection, uplift, transport collection, delivery, storage and display of the machines at Eagle will be the responsibility of Eagle Power Ltd. at no cost to JMP Developments.

Accordingly, please find enclosed cheque to the value of £20,000 + VAT as the agreed deposit.”

The reaction of Eagle to receipt of that letter seems to have been to produce an undated invoice numbered 1107 in which the details of each of the relevant generating sets, including the Generating Sets, was recorded, with a price of £20,000, together with Value Added Tax of £4,000. Upon the face of the invoice was typed the words, “We hearby [sic] pass full title of these goods to JMP Developments upon full payment of this invoice.” The copy of the invoice adduced in evidence also bore upon it in manuscript the words, “PAID IN FULL [followed by a signature] 5/4/2011” and the words, “Paid 5/4/11 Chq No 102000”. On the assumption, which was not disputed before me, that Eagle had the ability in law at that stage to transfer title to the five generating sets the subject of the invoice to Mr. Pollak, it would seem that at that point he acquired, so far as is presently material, title to the Generating Sets.

Subsequently Eagle raised an invoice numbered 1125 dated 28 April 2011 in respect of the balance of the agreed price of the five generating sets, £130,000 plus Value Added Tax of £26,000, making a total of £156,000. Again the invoice set out the details of the five generating sets. Beneath those details were typed the words, “We hereby pass full title of the above generators to JMP Developments upon full payment of this invoice”. In the circumstances those words seem to have been unnecessary, as property had already passed.

At all events, the reaction of Mr. Pollak to receipt of the invoice numbered 1125 was to write a letter dated 5 May 2011 to Eagle to this effect:-

“Re: 5 x Cummins Gensets, Switchgear & Accessories

Thank you for your invoice No. 1125 dated 28/04/11 covering the balance for the acquisition of 5 x Cummins Gensets, Switchgear and Accessories previously owned by JP Morgan at Chaseside, Bournemouth.

Accordingly please find enclosed cheque to the value of £156,000.00 inc VAT in full payment of your invoice.

In accordance with our agreement, it will be your obligation to make arrangements to oversee and assist with the careful dismantling and loading of the equipment onto your transport for delivery and storage at West Bromwich [that is, at the premises of Eagle].

I trust that above together with the attached will meet with your approval.”

It seems that at least the Generating Sets were collected from Bournemouth and taken to the premises of Eagle in West Bromwich by about the middle of June 2011. In a witness statement dated 21 February 2013 made for the purposes of this action, Mr. Pollak said, in passages which were not disputed:-

“23.

Between 23 May and 15 June 2011 I visited JP Morgan’s premises in Bournemouth on a number of occasions. Again, my wife accompanied me on the journeys. Whilst Eagle Power were primarily responsible for moving my machines to West Bromwich I had played an active hands on role in ensuring that they were properly disconnected, uplifted and in particular all spares and ancillary items were taken to Eagle Power’s West Bromwich depot. It was important from my point of view to ensure that all ancillary items were taken. This is because the ancillary equipment would allow the machines to work in synchronisation with each other, and either as ‘stand alone’ or in tandem with the mains supply when required as ‘power stations’. Mini Power Stations comprise of two or more generators that can be electrically synchronised together to produce a more substantial, flexible and reliable combined power output. These are popular in the developing world.

24.

When my machines and ancillary components were transported I attended Eagle Power’s premises to supervise the unloading and to ensure that the items were stored properly in my area at Eagle Power’s premises.”

Notwithstanding that it had sold the Generating Sets to Mr. Pollak, it was obviously possible, in theory, for Eagle to seek to offer the Generating Sets to some other party, if what was contemplated was that Eagle would re-purchase the Generating Sets from Mr. Pollak in the event of finding another customer who was interested in purchasing them from Eagle. Whether or not that was what was actually in the Eagle corporate mind, it did, in about June 2011, prepare what was described as a “Used Generator Stock List” which included, “2 MW CUMMINS MARATHON [identified as the relevant type of alternator] 2 x 1270 kVA sets [Year] 1989 [Hours] 1582”. That entry was consistent with a description of the Generating Sets. The price quoted for the items in question was £165,000. Mr. Alan Clarke, sales director of Eagle, sent the Used Generator Stock List to Mr. Fadallah under cover of an e-mail dated 10 June 2011, indicating that “prices are ex-our works less 15% discount in your favor [sic]”.

It was not in dispute before me that Mr. Fadallah agreed with Mr. Clarke on about 1 July 2011 to purchase the two Cummins generating sets mentioned in the Used Generator Stock List for the price of £110,000. That same day Mr. Nijim, or, perhaps, his assistant Trish Marshall, whose e-mail address was used for the communication, although, on the face of it, it was signed by Mr. Nijim, sent an e-mail to Mr. Fadallah setting out the bank details of Eagle, and concluding, “Please transfer the sum of £50,000 GBP as agreed. We will hold this on account for any future purchase.”

By a letter dated 4 July 2011 addressed to FINBank Plc Mr. Mohammed Tahir instructed that bank to remit £50,000 to the account of Eagle, explaining that, “The amount is an advance payment for the purchase of two 1,270 KVA diesel generators for our hotel. The total cost of the generators is 110,000 [originally typed as 120,000, but corrected in manuscript] Sterling Pounds.”

Mr. Mohammed Tahir gave a similar instruction to FINBank Plc in a letter dated 11 July 2011. The letter repeated the bank details of Eagle’s account, but began:-

“With reference to the above, please remit the sum of 50,000 Sterling Pounds to the account below. The amount is the second advance payment for the purchase of two 1,270 KVA diesel generators for our hotel. The total cost of the generators is 110,000 Sterling Pounds.”

In a Statement of Account dated 18 August 2011 addressed to Mr. Fadallah Eagle acknowledged that it had received two amounts of £50,000, respectively on 5 July 2011 and on 13 July 2011, on account of the sum of £110,000 due in respect of what was described in the Statement of Account as “Proforma invoice no. 170802 for 2 x 1270 kVA Cummins KTA52G3 diesel generators”. No copy of that proforma invoice was adduced in evidence, but in an e-mail dated 17 August 2011 to Mr. Fadallah Mr. Clarke mentioned “£10,000 balance on the 2 x 1270 kVA Used Cummins generators”, as well as another sum due of £30,000 in respect of a further generator which it was desired by Mr. Fadallah to purchase. In a letter dated 17 August 2011 to FINBank Plc instructions were given to remit £40,000 to the bank account of Eagle. The letter commenced with this paragraph:-

“With reference to the above, please remit the sum of 40,000 Sterling Pounds to the account below. The amount is the third advance payment for the purchase of diesel generators for our hotel.”

In his written skeleton argument prepared for the purposes of the trial of this action Mr. Luke Harris, who appeared on behalf of Mr. Fadallah, submitted, at paragraph 34(2) and (3):-

“(2)

It is sufficient to constitute delivery to the buyer for the purposes of [Sale of Goods Act 1979] s.24 that, after the sale, the buyer is in possession of the goods within the meaning of s.1(2) F[actors] A[ct]1889; …. This section provides:

“A person shall be deemed to be in possession of goods or of the documents of title to goods, where the goods or documents are in his actual custody or are held by any other person subject to his control or for him or on his behalf”

(3)

Mr. Fadallah was clearly in possession of the goods in this sense after payment of the final instalment to Eagle on 17.08.11. Once property was intended to pass [to] Mr. Fadallah the parties necessarily intended that Eagle would hold the goods as Mr. Fadallah’s bailee: … Thus, s.1(2) FA 1889 is satisfied and there was constructive delivery for the purposes of s.24.”

Mr. Anthony Higgins, who appeared on behalf of Mr. Pollak, accepted that, by reason of the payment of the full price agreed by Mr. Fadallah on or about 17 August 2011, upon which event it had been agreed between Eagle and Mr. Fadallah that property in the Generating Sets would pass to Mr. Fadallah, constructive delivery of the Generating Sets to Mr. Fadallah had taken place, or, more accurately, would have taken place had Eagle been in a position to pass good title to Mr. Fadallah at that time. As I shall observe later in this judgment, Mr. Harris resiled to an extent from what was pleaded in paragraph 34(3) of his written skeleton argument when he came to make his closing submissions.

Although there was some challenge to the circumstances in which Mr. Pollak contended that this happened, he raised an invoice numbered 00613 dated 30 August 2011 in respect of the sale of the Generating Sets to Eagle. The price specified was £100,000 plus Value Added Tax of £20,000. The invoice was sent by Mr. Pollak to Eagle in the first instance by facsimile transmission under cover of a letter also dated 30 August 2011 in which he said, simply, “As per our conversation today re the above please find attached invoice for the sale of these two machines.” Mr. Pollak then sent the original of the invoice to Eagle by post under cover of a different letter, also dated 30 August 2011, of which the text read:-

“Please find attached invoice covering the sale of the above machines.

I trust the above together with the attached will meet with your approval and await receipt of your payment by return.”

The letter dated 30 August 2011 sent by post noted, at the end, “Attachment Invoice No 00613 dated 30/8/11”.

In an e-mail to Mr. Fadallah sent on 26 August 2011 Mr. Clarke wrote:-

“Please see below the shipping prices we have received. Would you please let me know if these are acceptable to you and if so let me know. On top of this will be the cost of the CTN (cargo tracking note) charge of £235 per container. I look forward to your soonest reply.”

Mr. Fadallah seems to have queried whether he had to pay shipping costs in addition to the agreed purchase price of the Generating Sets, for in an e-mail sent on 1 September 2011 to Mr. Fadallah Mr. Clarke said:-

“Following our telephone conversation I confirm that the shipping costs as shown below are not part of the costs for the generators. These where [sic] sold as Ex Works Prices only. I look forward to your reply.”

Mr. Fadallah appears to have agreed that he would have to meet the costs of shipping the Generating Sets, for in an e-mail sent on 1 September 2011 to Mr. Fadallah Mr. Clarke wrote:-

“To confirm our telephone conversation the amount to be transferred is £9,040.”

In a letter dated 1 September 2011 to FINBank Plc instructions were given on behalf of Mr. Fadallah for a further transfer of funds to the bank account of Eagle:-

“With reference to the above, please remit the sum of 9,040 Sterling Pounds to the account below. The amount is the final payment for the cost and freight of diesel generators for our hotel.”

New regulations governing the importation into Nigeria of generating sets were issued by Nigerian Electricity Regulatory Commission in about September 2011. Having become aware of the existence of those regulations Mr. Clarke sent an e-mail dated 26 September 2011 to Mr. Fadallah which was in these terms:-

“Please see attached email we have received. Will you please find out about this as our shippers will not ship until an answer can be clarified.”

The case which Mr. Fadallah wished to pursue at trial was set out in the Re-Amended Particulars of Claim. Material allegations included in the Re-Amended Particulars of Claim which contended for facts which were in dispute, at least as to the precise implications of what was alleged, omitting underlinings or strikings through, were:-

“2.

Following this sale [that of the Generating Sets by Eagle to Mr. Pollak] with the consent of the Defendant the Cummins generators were in the possession of Eagle Power Limited (“Eagle”) at the latter’s premises at Johnsons Bridge Road, Church Lane, West Bromwich at all material times prior to the beginning of July 2011.

[and]

6.

On a date unknown to the Claimant, but prior to the beginning of July 2011, the Defendant agreed to sell the Cummins generators to Eagle for £100,000 and upon such agreement, title thereto passed to Eagle.”

It appears that it was always appreciated on behalf of Mr. Fadallah that what was pleaded at paragraph 6 of the Particulars of Claim (and remained unamended through subsequent versions) was somewhat speculative, for paragraph 9 of the original Particulars of Claim sought to raise alternative possible routes to success on the part of Mr. Fadallah. In the final, Re-amended, version four possible alternatives were canvassed. Omitting underlinings these were:-

“If, which is denied, title to the Cummins generators did not pass to Eagle under Paragraph 6 hereof, the Claimant will aver as follows:

9.1

the Cummins generators were, with the consent of the Defendant, in the possession of Eagle as a mercantile agent and Eagle sold them to the Claimant in the ordinary course of its business and the Claimant took the Cummins generators in good faith without notice of Eagle’s lack of authority to sell the same;

9.2

in the alternative Eagle had purchased or agreed to purchase the Cummins generators from the Defendant and the same were in the possession of Eagle with the consent of the Defendant; following his purchase of the Cummins generators from Eagle, the same were constructively delivered to the Claimant by Eagle and he received them in good faith without notice of the Defendant’s ownership thereof;

9.3

in the further alternative Eagle had sold the Cummins generators to the Defendant and Eagle was in possession of the same pursuant to that sale when Eagle sold them to the Claimant; following his purchase of the Cummins generators from Eagle, the same were constructively delivered to the Claimant by Eagle and he received them in good faith without notice of the Defendant’s ownership thereof or the previous sale by Eagle to the Defendant;

9.4

in the further alternative in or about August 2011 the Defendant sold or agreed to sell the Cummins generators to Eagle, whereupon property in same passed to Eagle notwithstanding that Eagle might not have paid for the Cummins generators (which non-payment is not admitted and for the avoidance of doubt the Defendant is also put to proof that any retention of title formed part of his sale agreement with Eagle); and upon property in the Cummins generators passing to Eagle as aforesaid, property in the same passed to the Claimant under the sale by Eagle to the Claimant.”

Mr. Pollak did not accept that he had agreed, as alleged on behalf of Mr. Fadallah, to sell the Generating Sets to Eagle prior to the beginning of July 2011. In his witness statement dated 21 February 2013 he gave this account of the making of the agreement to sell and what happened thereafter:-

“44.

In or around the end of July 2011 I received a telephone call from Mr. Nijim. He informed me that he had a customer based in Nigeria who had bought from them before and that he was interested in purchasing the two 1270KVA Cummings [sic] KTA 50G3/Marathon Gensets belonging to me, which I had previously purchased from Eagle Power. He wanted to know whether I would be prepared to sell them back to Eagle and if so, for how much. As I have indicated earlier in this statement, there was nothing particularly surprising in this. After some haggling, I indicated that I would be prepared to sell the Gensets to Eagle Power for £100,000 plus VAT but that, until I had a firm commitment from Eagle Power to purchase the machines, I would continue to market them. I reiterated that they could not deal with the machines until I had been paid the full agreed price. I was not told who Eagle Power’s potential customer was nor did I ask. This was nothing to do with me. If the transaction proceeded Eagle Power would be purchasing from me and who they sold the machines onto and what profit they made on the transaction was a matter purely for them.

45.

On 24 August 2011 I was told that Eagle Power wanted to proceed with the purchase. I was verbally requested to reserve the machines which I agreed to do.

46.

On 30 August 2011 it was indicated to me by Mr. Nijim that deposit monies were being sent to Eagle Power from Nigeria. Accordingly I was requested to send an invoice to Eagle Power for the machines in the agreed sum of £100,000 plus VAT. Accordingly, on the same date I sent Eagle Power my invoice number 00613 in the sum of £100,000 plus VAT. A copy of the invoice and the accompanying letter are attached to this statement.

47.

Both the invoice and the letter requested payment by return and was subject to my terms and conditions of business which was supplied and which were well known to Eagle Power Limited from previous dealings. It was clear from these that until payment was made in full, Eagle Power Limited would continue to be merely storing the generator [sic] on my behalf. Notwithstanding the requirement of Eagle Power Limited to make payment of the invoice by return, they did not do so. Indeed the invoice remains unpaid. The delay in payment began to cause me concern, this was compounded by rumours I was hearing in the industry that Eagle Power Limited were in some cash flow difficulty.

48.

…

49.

… [On 16 September 2011] I accordingly spoke to Mr. Nijim by telephone. It was agreed that since Eagle Power could not afford to complete the purchase with me at that time, the invoice would be cancelled and that the sale of the machines to Eagle Power Ltd. would not proceed. …”

Mr. Tahir Fadallah made two witness statements for the purposes of this action, dated, respectively, 25 November 2011 and 15 March 2013. In those witness statements Mr. Fadallah spoke of his dealings with Eagle in relation to the Generating Sets, to the effect evidenced by the contemporaneous documentation to which I have already referred. He was not challenged as to his evidence. Mr. Pollak was challenged on his evidence as to the circumstances in which he came to sell the Generating Sets to Eagle. It was put to Mr. Pollak that in fact he had agreed to sell the Generating Sets to Eagle at some point prior to 1 July 2011. Mr. Pollak denied that, and affirmed the version set out in the passages from his witness statement which I have quoted. It was suggested to Mr. Pollak that, contrary to his assertion that he had supplied a copy of the Pollak Terms under cover of his letter dated 30 August 2011 sent by post, he had not done so. Mr. Pollak explained to me that he was confident that he had done so, because it was his practice always to include a copy of the Pollak Terms with a letter sent by post enclosing an invoice. He accepted that his letter dated 30 August 2011 did not refer to the Pollak Terms, or to a copy of the Pollak Terms as being attached. He also accepted that his invoice numbered 00613 did not refer to the Pollak Terms either. However, he said that the nature of his business was such that he issued perhaps only eight invoices per annum, and he always included a copy of the Pollak Terms with any invoice sent by post. It was suggested to Mr. Pollak that he had used, at least on some unspecified occasion or occasions, Eagle as an agent to sell items belonging to Mr. Pollak. Mr. Pollak denied that. He said that he had never used Eagle as an agent to sell. What had happened was that when Mr. Pollak had had machinery stored with Eagle, Eagle had approached him to purchase items from him with a view to resale by Eagle to its own customer, and such sales had taken place. Mr. Pollak was asked about purchases from Eagle. He told me that usually he only purchased items if he had an existing customer for what he was buying. On those occasions, if he purchased an item from Eagle for resale to Mr. Pollak’s own customer, he collected the item immediately after purchase. However, there had been occasions, and the purchase of the Generating Sets by Mr. Pollak from Eagle had been one, when he had purchased items for stock. Mr. Pollak had no storage facilities of his own, and it had sometimes been agreed, as it was in relation to the Generating Sets, that, if Mr. Pollak purchased the item in question from Eagle, Eagle would store the item at its own premises without charge until Mr. Pollak found a customer for the item. The points which I have recorded were put to Mr. Pollak by Mr. Harris on behalf of Mr. Fadallah very properly, as they arose out of the pleaded case of Mr. Fadallah. However, I have to say that I was most impressed by Mr. Pollak as a witness and I accept without reservation his evidence on the contested matters which I have rehearsed.

The evidence of Mr. Pollak as to the terms of his dealings with Eagle, the circumstances in which Mr. Pollak sold the Generating Sets to Eagle and upon what terms, and as to Eagle not having acted as a mercantile agent was supported by evidence from Mr. Nijim and from Mr. Clarke, each of whom was called as a witness on behalf of Mr. Pollak. Mr. Nijim told me that Eagle had never acted as a mercantile agent for anybody. However, Eagle had on occasions sought to sell to its customers items which it believed it would be able to acquire on satisfactory terms from a third party, and it was with that intention that the agreement to sell the Generating Sets to Mr. Fadallah had been made. What had been anticipated was that, in order to perform Eagle’s obligations under that agreement, Eagle would purchase the Generating Sets from Mr. Pollak. Mr. Pollak was, indeed, prepared to sell the Generating Sets to Eagle at a price which was acceptable to Eagle, and a contract of sale was made on or about 30 August 2011, and not before. Why the matter of the purchase did not go forward, Mr. Nijim told me, was because Eagle did not receive funds which it had expected to be paid and out of which it would have been able to pay the agreed price of the Generating Sets to Mr. Pollak. Both Mr. Nijim and Mr. Clarke told me that it was Mr. Pollak’s custom to send a copy of the Pollak Terms to Eagle with any invoice, and Mr. Nijim said that he believed that Mr. Pollak had done so when sending the invoice numbered 00613 by post. In any event, both Mr. Nijim and Mr. Clarke accepted in cross-examination that each was aware of the Pollak Terms and that they included the provision that property in goods sold should not pass until paid for in full. For reasons which will be obvious, Mr. Nijim was in an embarrassing position in giving evidence about the dealings of Eagle concerning the Generating Sets. However, he impressed me by his candour, and I accept his evidence without reservation. Mr. Clarke was also an impressive witness. His direct involvement in the matter of the Generating Sets was limited, but he was plainly anxious to assist the court, so far as he could, and I accept his evidence also without hesitation.

It follows, from my acceptance of the evidence of Mr. Pollak which I have summarised, that the contention on behalf of Mr. Fadallah that Mr. Pollak had agreed at some point prior to 1 July 2011 to sell the Generating Sets to Eagle, fails.

By Sale of Goods Act 1979 s.21 it is provided, so far as is presently material:-

“(1)

Subject to this Act, where goods are sold by a person who is not their owner, and who does not sell them under the authority or with the consent of the owner, the buyer acquires no better title to the goods than the seller had, unless the owner of the goods is by his conduct precluded from denying the seller’s authority to sell.

(2)

Nothing in this Act affects –

(a)

the provisions of the Factors Acts or any enactment enabling the apparent owner of goods to dispose of them as if he were the true owner;”

On my findings, Eagle was not the owner of the Generating Sets when it sold them to Mr. Fadallah. Consequently it is necessary to consider the various alternative bases of claim pleaded in paragraph 9 of the Re-Amended Particulars of Claim.

Although, in paragraph 9 of the Re-Amended Particulars of Claim, the first alternative case set out was that Eagle had sold the Generating Sets to Mr. Fadallah as a mercantile agent of Mr. Pollak, in Mr. Harris’s written skeleton argument that alternative was demoted to the fourth rank. That was, perhaps, not surprising, because it depended critically upon whether, as a matter of fact, Eagle had been a mercantile agent acting on behalf of Mr. Pollak.

What was relied upon on behalf of Mr. Fadallah was the provisions of Factors Act 1889 s.2(1):-

“Where a mercantile agent is, with the consent of the owner, in possession of goods or of documents of title to goods, any sale, pledge or other disposition of the goods, made by him when acting in the ordinary course of business of a mercantile agent, shall, subject to the provisions of this Act, be as valid as if he were expressly authorised by the owner of the goods to make the same; provided that the person taking under the disposition acts in good faith, and has not at the time of the disposition notice that the person making the disposition has not authority to make the same.”

That provision is obviously intended to deal with a situation in which an owner of goods has given a mercantile agent possession of goods, or of documents of title to goods, but not authority to sell them, but the mercantile agent has sold them anyway. What is critical to the operation of the sub-section is that the person purporting to sell the goods should be a mercantile agent appointed to act on behalf of the owner of the goods. The expression “mercantile agent” is defined, for the purposes of Factors Act 1889 in s.1(1) of that Act:-

“The expression “mercantile agent” shall mean a mercantile agent having in the customary course of his business as such agent authority either to sell goods, or to consign goods for the purposes of sale, or to buy goods, or to raise money on the security of goods.”

There was no evidence before me that the business of Eagle had been that of a mercantile agent. Rather the evidence was that Eagle’s business, during its existence, had been that of a buyer and seller of power generation equipment. As I have already indicated, I accept the evidence of Mr. Pollak and that of Mr. Nijim that Mr. Pollak never retained Eagle to act as his agent for the sale of any goods, and in particular not the Generating Sets. Consequently this alternative basis for the claims of Mr. Fadallah also fails.

In his written skeleton argument Mr. Harris advanced as the first alternative basis for the claims of Mr. Fadallah the proposition that, by reason of the sale of the Generating Sets by Mr. Pollak to Eagle on or about 30 August 2011, title to the Generating Sets had passed from Mr. Pollak to Eagle, and that passing of title had had the consequence of “feeding” the title which should have passed from Eagle to Mr. Fadallah pursuant to the agreement of sale between those parties, had Eagle at the time of that sale possessed title to the Generating Sets. Mr. Harris relied upon the decision of Pearson J in Butterworth v. Kingsway Motors Ltd. [1954] 1 WLR 1286.

Sale of Goods Act 1979 s. 17 is in these terms:-

“(1)

Where there is a contract for the sale of specific or ascertained goods the property in them is transferred to the buyer at such time as the parties to the contract intend it to be transferred.

(2)

For the purposes of ascertaining the intention of the parties regard shall be had to the terms of the contract, the conduct of the parties and the circumstances of the case.”

In Sale of Goods Act 1979 s.18 are set out “… rules for ascertaining the intention of the parties as to the time at which the property in the goods is to pass to the buyer” which apply “Unless a different intention appears”.

The effect of Sale of Goods Act 1979 ss. 17 and 18, as it seems to me, is that, in a case in which the contract of sale provides for the time at which the property in the goods sold is to pass, that contractual provision is decisive.

Mr. Higgins did not dispute the approach of Pearson J in Butterworth v. Kingsway Motors Ltd. in an appropriate case. However, he contended at paragraph 33 of his written skeleton argument that there was a critical difference between the facts of the case before Pearson J and the facts of the present case:-

“Since Eagle never re-acquired title to the Cummins Generators from the Defendant because the contract of sale between them was subject to the condition that property would not pass until the Defendant had been paid in full, and the Defendant was never paid, the effect of their contract was not to feed Eagle’s title and to enable it [to] give good title, belatedly, to the Claimant.”

On my findings of fact that is a complete answer to this alternative way of putting Mr. Fadallah’s claims. Under the agreement made between Mr. Pollak and Eagle on or about 30 August 2011, by clause 6(b) of the Pollak Terms incorporated therein both expressly and impliedly by a course of dealing, title was not to pass from Mr. Pollak to Eagle until Eagle had paid in full the agreed price. That never happened. Instead the contract of sale was discharged by mutual agreement between Mr. Pollak and Eagle on about 16 September 2011.

By Sale of Goods Act 1979 s.24 it is provided that:-

“Where a person having sold goods continues or is in possession of the goods, or of the documents of title to the goods, the delivery or transfer by that person, or by a mercantile agent acting for him, of the goods or documents of title under any sale, pledge or other disposition thereof, to any person receiving the same in good faith and without notice of the previous sale, has the same effect as if the person making the delivery or transfer were expressly authorised by the owner of the goods to make the same.”

The next alternative case of Mr. Fadallah was that Eagle, having sold the Generating Sets to Mr. Pollak, continued or was in possession of the Generating Sets and had delivered or transferred them to Mr. Fadallah, who received them in good faith and without notice of the previous sale. Consequently, it was said, title to the Generating Sets had passed to Mr. Fadallah.

Again, however, it seems that the actual facts of the present case are important. Prior to the sale of the Generating Sets to Mr. Pollak they had never been in the physical possession of Eagle. They had been in the physical possession of J.P. Morgan. The Generating Sets only came into the physical possession of Eagle after title in them had passed to Mr. Pollak and he had taken physical possession of them at the premises of J.P. Morgan in the sense of supervising the disconnection of the Generating Sets and ancillary equipment and the loading of the Generating Sets onto lorries for transport from the premises of J.P. Morgan, and the unloading of the Generating Sets at the premises of Eagle. At the point at which the Generating Sets were unloaded and stored at the premises of Eagle it was simply a gratuitous bailee of the Generating Sets.

In Pacific Motor Auctions Pty. Ltd. v. Motor Credits (Hire Finance) Ltd. [1965] AC 867 the Privy Council had to consider Sale of Goods Act 1923 s.28(1) of New South Wales, which was in terms not materially different from those of Sale of Goods Act 1979 s.24 or those of Sale of Goods Act 1895 s.27(1) of New Zealand. The New Zealand provision had been considered by the Supreme Court of New Zealand in Mitchell v. Jones (1905) 24 NZLR 932. In Pacific Motor Auctions Pty. Ltd. v. Motor Credits (Hire Finance) Ltd. the Privy Council, in its advice, delivered by Lord Pearce, at pages 883 – 884 approved the decision of the Supreme Court of New Zealand in this passage:-

“The first reported question that arose about the construction of those same words is to be found in Mitchell v. Jones, a case under the New Zealand Sale of Goods Act, 1895. There the owner of a horse sold it to a buyer and some days later obtained it back from him on lease. Then, having possession of the horse in the capacity of lessee, he sold it a second time to an innocent purchaser. The full court held that the innocent purchaser was not protected. Stout CJ said: “The point turns on how the words ‘or is in possession of the goods’ in the subsection are to be construed … The meaning is – first, that if a person sells goods and continues in possession, even though he has made a valid contract of sale, provided that he has not delivered them, he may to a bona fide buyer make a good title; and, secondly, the putting in of the words ‘or is in possession of the goods’ was meant to apply to a case of this character: if a vendor had not the goods when he sold them, but they came into his possession afterwards, then he would have possession of the goods, and if he sold them to a bona fide purchaser he could make a good title to them. He would be in the same position as if he had continued in possession of the goods when he made his first sale. In such a case as that he could make a good title to a bona fide purchaser.

“That is not this case. In this case the person who sold the goods gave up possession of them, and gave delivery of them to the buyer. The relationship, therefore, of buyer and seller between them was at an end. It is true that the seller got possession of the goods again, but not as a seller. He got the goods the second time as the bailee of the buyer, and as the bailee he had no warrant, in my opinion, to sell the goods again, nor could he make a good title to them to even a bona fide purchaser.”

And Williams J said that the section “does not … apply where a sale has been absolutely final by delivery, and possession has been obtained by the vendee.” It has not been doubted in argument nor do their Lordships doubt that that case was rightly decided.”

It thus appears, in my judgment, that the critical question, for the purposes of Sale of Goods Act 1979 s.24, is, in what capacity did the party which first sold the goods in question acquire physical possession of the goods before the second sale. If it was qua seller, the section could apply. However, if it was in some other capacity, as in Mitchell v. Jones, then the fact that, at an earlier point in time, the seller of the goods on the second occasion had sold the goods on the first occasion, the section did not apply. That that is the critical question is rather emphasised by the decision in Pacific Motor Auctions Pty. Ltd. v. Motor Credits (Hire Finance )Ltd. itself. In that case the goods in question had remained throughout in the physical possession of the party which was the seller in the first and second sales. Lord Pearce said, at pages 865 – 866:-

“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. On this point their Lordships accept the observations of the judges in Mitchell v. Jones as to the words “or is” which are the sole grounds for any doubt on this point. 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 along 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?”

It cannot be said that the distinction between a case in which a seller has continued in possession of goods which he has sold a second time, and a case in which, not having had possession of the goods at the time of the first sale, the seller subsequently obtained possession before making the second sale, is particularly satisfactory. However, it does at least make it clear that Sale of Goods Act 1979 s.24 would not apply in an extreme case, such as a seller of goods in, say, 2000, who received them back from the original purchaser in 2013 to make repairs, or to refurbish the goods, but in fact sold them on. Whether the distinction is satisfactory or not, it does seem to be clearly established.

On the uncontested evidence of Mr. Pollak it seems plain that, following his purchase of the Generating Sets, delivery of the Generating Sets was made to him and, in the manner which I have explained he came into physical possession of the Generating Sets. In Michael Gerson (Leasing) Ltd. v. Wilkinson [2001] QB 514 the leading judgment was that of Clarke LJ. At paragraph 28 on page 526 he explained the concept of delivery for the purposes of the law of sale of goods:-

“In my judgment the legal position is as set out by both Pollock & Wright and Bowstead. Thus, where a seller in possession of the goods sold acknowledges that he is holding the goods on account of the buyer in circumstances where (as Pollock & Wright put it, at p.72) he recognises the purchaser’s right to possess as owner and his continuing to hold the goods thereafter as the bailee with possession derived from that right, then (as Pollock & Wright put it, at p.73) the transaction amounts to delivery to the seller as bailee and that is so whether the seller’s custody is “in the character of a bailee for reward or of a borrower”. There is a change of character of the seller’s possession when he holds the goods for the buyer and, indeed, when he subsequently becomes, say, the bailee from the buyer for reward.”

If delivery can take place simply by the acknowledgment by a seller in possession that he recognises the right of the purchaser to possess as owner, it seems to me that a case in which the seller has never been in possession whilst a seller, but arranges, as in the present case, to have collected and delivered to it, in order to hold to the order of the purchaser, the goods the subject of the sale is an a fortiori case. The goods have been delivered to the purchaser and are received into its physical possession for the first time by the seller, not as seller, but as bailee.

The significance of delivery in the present case did not relate simply to the capacity in which Eagle first received the Generating Sets into its physical possession. For Sale of Goods Act 1979 s.24 to be of any application it was necessary for there to be “the delivery or transfer by [the person having sold the goods] of the goods … under any sale … to any person receiving the same in good faith and without notice of the previous sale”. In other words, the section was of no application in the circumstances of the present case in any event unless the Generating Sets had been the subject of “delivery or transfer” by Eagle to Mr. Fadallah.

It was common ground that Eagle had never transferred the physical custody of the Generating Sets to Mr. Fadallah. Thus, if it was to be said that there had been delivery of the Generating Sets to Mr. Fadallah it had to be shown that Eagle had recognised the right of Mr. Fadallah to possess the Generating Sets as owner. The highest that it could be put, as it seems to me, was that, by virtue of the terms of the contract between Eagle and Mr. Fadallah, property in the Generating Sets was intended to pass from Eagle to Mr. Fadallah upon the making by Mr. Fadallah of full payment for the Generating Sets, so on or about 17 August 2011, and that consequently on the relevant date there was a constructive delivery to Mr. Fadallah. That was the case for which Mr. Harris contended in his skeleton argument, and Mr. Higgins did not dispute that contention. Indeed, as I shall explain, in another context Mr. Higgins positively relied upon that analysis.

Mr. Harris submitted that Eagle acknowledged that it was holding the Generating Sets on behalf of Mr. Fadallah by communicating, as it did, with Mr. Fadallah concerning the costs of transportation of the Generating Sets to Nigeria, which it asked Mr. Fadallah to pay, and shipping dates. I have already quoted the e-mails dated, respectively, 26 August 2011, 30 August 2011, I September 2011 and 26 September 2011 from Mr. Clarke to Mr. Fadallah upon which Mr. Harris relied. However, those communications seem to me to be equivocal and not necessarily consistent only with Eagle recognising that Mr. Fadallah had the right to possession of the Generating Sets as owner. However, bearing in mind that it was common ground in relation to Mr. Fadallah’s case in respect of Sale of Goods Act 1979 s.24 that there had been a constructively delivery to Mr. Fadallah on or about 17 August 2011, that equivocation was not material.

Consequently, in my judgment, Mr. Fadallah was not able to rely, in support of his claims against Mr. Pollak upon the provisions of Sale of Goods Act 1979 s.24 because Eagle did not obtain possession of the Generating Sets in its capacity as the seller of those items to Mr. Pollak.

The last alternative foundation for his claims upon which Mr. Fadallah sought to rely was the provisions of Sale of Goods Act 1979 s.25(1):-

“Where a person having bought or agreed to buy goods obtains, with the consent of the seller, possession of the goods or the documents of title to the goods, the delivery of transfer by that person, or by a mercantile agent acting for him, of the goods or documents of title, under any sale, pledge or other disposition thereof to any person receiving the same in good faith and without notice of any lien or other right of the original seller in respect of the goods, has the same effect as if the person making the delivery or transfer were a mercantile agent in possession of the goods or documents of title with the consent of the owner.”

In the light of my finding that Mr. Pollak did not agree to re-sell the Generating Sets to Eagle until he entered into the agreement to sell on 30 August 2011, it would seem, simply as a matter of the ordinary understanding of the English language, that, in order to bring himself within Sale of Goods Act 1979 s.25(1), Mr. Fadallah would have to show that, at a point after 30 August 2011 Eagle obtained possession of the Generating Sets and delivered them to Mr. Fadallah. However, it was common ground that Eagle in fact had possession of the Generating Sets considerably earlier than 30 August 2011, and that fact seems to me to be fatal to the reliance of Mr. Fadallah upon the sub-section. Another fatal defect, in my judgment, was that, as was also common ground, delivery by Eagle to Mr. Fadallah of the Generating Sets took place constructively on or about 17 August 2011, in advance of the relevant contract between Mr. Pollak and Eagle, upon the making of full payment of the sum agreed to be paid by Mr. Fadallah to Eagle for the Generating Sets. In his closing submissions Mr. Harris sought to contend that, for the purposes of Mr. Fadallah’s reliance upon Sale of Goods Act 1979 s.25(1), delivery to Mr. Fadallah of the Generating Sets had not taken place on or about 17 August 2011, whilst maintaining for the purposes of Mr. Fadallah’s reliance upon Sale of Goods Act 1979 s.24, that it had. For the reasons which I have explained Mr. Harris had to contend for a delivery after 30 August 2011 in relation to the reliance upon Sale of Goods Act 1979 s.25(1), and that brought about the unhappy inconsistency in his client’s positions. However, I am satisfied that the submission in his written skeleton argument that there had been a delivery on or about 17 August 2011, which Mr. Higgins did not contest, was sound.

Mr. Harris, in his written skeleton argument, recognised the difficulties which Mr. Fadallah faced if I reached the conclusions which I have. He sought to avoid what appeared to me to be the plain construction of Sale of Goods Act 1979 s.25(1) by raising the contention that that provision did not require that the sale pursuant to which the delivery which that sub-section contemplated took place had itself to take place after the buyer in question assumed his capacity as such. Although the argument which Mr. Harris put forward was carefully constructed, it did not seem to me to overcome the fatal objections which I have already identified. Consequently Mr. Fadallah also failed to make out his claims based on Sale of Goods Act 1979 s.25(1).

In the result this action fails and is dismissed.