Trade

Sale and leaseback - finance company buying in good faith without notice of previous sale - good title depending on constructive delivery of goods by seller retaining possessionMichael Gerson (Leasing) Ltd v Wilkinson and Another: CA (Pill and Clarke LJJ and Bennett J): 31 July 2000

E Ltd sold heavy plant and machinery to the claimant finance company under a sale and leaseback agreement under which E Ltd retained physical possession of the goods.

E Ltd later sold some of the same goods to the second defendant finance company under another sale and leaseback agreement.

Both sale and leaseback agreements were subsequently terminated because of E Ltd's failure to maintain payments.

The second defendant sold the goods to S Ltd, who sold them to the first defendant.

On the claimant's claim for damages for conversion, the judge held that the second defendant, which was unaware of the claimant's interest, obtained good title to them by virtue of s.24 of the Sale of Goods Act 1979.

The claimant appealed, contending that no 'delivery or transfer' of the goods to the second defendant had occurred sufficient to entitle it to rely on s.24.

Sir Roy Goode QC and Peter J Goodbody (instructed by Hill Dickinson) for the claimant.

Paul Chaisty (instructed by Apfel Carter, Lytham St Annes) for the first defendant.

Michael Lerego QC and Miss Linden Ife (instructed by Lester Aldridge, Bournemouth) for the second defendant.

Held, dismissing the appeal, that although they never left the seller's site, goods which were the subject of a sale and leaseback agreement should be regarded as being constructively 'delivered' by the seller to the finance company which bought them, since it could not otherwise lease the goods back to the seller; and that a finance company acquiring the goods in good faith and without knowledge of their previous sale thus obtained good title by virtue of s.24 of the 1979 Act, and was not liable to the other finance company in conversion.

(WLR)