Carroll v Bourke

• Jurisdiction: Ireland
• Judge: Mr. Justice Murphy
• Judgment Date: 01 January 1990
• Neutral Citation: [1989] IEHC 1
• Docket Number: 7481p/88,[1986 No. 7401 P]
• Court: High Court
• Date: 01 January 1990

[1989] IEHC 1

THE HIGH COURT

7481p/88

CARROLL GROUP DISTRIBUTORS LTD v. G & J F BOURKE LTD

BETWEEN/

CARROLL GROUP DISTRIBUTORS LIMITED

PLAINTIFFS

AND

G. AND J.F. BOURKE LIMITED (IN VOLUNTARY LIQUIDATION) AND BOURKE (SALES) LIMITED (IN VOLUNTARY LIQUIDATION)

DEFENDANTS

Citations:

BATEMAN V GREEN & KING 1868 IR 2 CL 166

MCENTIRE V CROSSLEY BROTHERS LTD 1895 AC 457

SALE OF GOODS ACT 1893 S19(1)

KNATCHBULL V HALLETT 1880 13 CH 696

GEORGE INGLEFIELD LTD, IN RE 1933 CH 1

FRIGOSCANDIA (CONTRACTING) LTD V CONTINENTAL IRISH MEATS LTD 1982 ILRM 396

COMPANIES ACT 1963 S99

KENT AND SUSSEX SAWMILLS LTD, IN RE 1947 CH 177, 1946 2 AER 638

INTERVIEW LTD, IN RE 1975 IR 383

ROSCOE V WINDER 1915 1 CH 62

SALE OF GOODS ACT 1893 S62(3)

HALLETTS ESTATE, IN RE 1880 13 CH 696

Synopsis:

SALE OF GOODS

Property

Transfer - Title - Retention - Unpaid seller - Re-sale by company buyer - Proceeds of re-sale - Buyer being trustee of proceeds - Proceeds charged with payment of price to seller - Seller's claim to proceeds - Unregistered charge invalid - Companies Act, 1963, s. 99 - (1988/7481 P - Murphy J. - 4/10/89) - [1990] 1 I.R. 481

|Carroll Group Distributors v. G. & J.F. Bourke Ltd.|

WORDS AND PHRASES

"Charge"

Registration - Failure - Unpaid seller - Retention of title - Goods resold by buyer - Proceeds of resale - Purported charge in favour of seller - Charge invalid - (1988/7481 P - Murphy J. - 4/10/89) - [1990] 1 I.R. 481 - [1990] ILRM 285

|Carroll Group Distributors v. G. & J.F. Bourke Ltd.|

1 Judgement of Mr. Justice Murphy delivered the 4thday of october 1989.

2 This is yet one more case of the many which have arisen in recent years concerning the interpretation and application of what have come to be known as "retention of title clauses".

3 The Plaintiffs ("Carrolls") are the well known Tobacco Company and the two Defendant Companies ("Bourkes") carried on a retail business in Limerick. The affairs of the two Defendant Companies were so intertwined that they in fact constituted one operation and accordingly have been treated for all purposes as if they constituted only one Company. Between the 4th of February 1986 and the 2nd of April 1986 Carrolls supplied to Bourkes goods to the value of £54,517.26p. Bourkes were allowed approximately four weeks credit and it is common case that the conditions on which the goods were supplied included a reservation of title clause in the terms set cut in the Appendix to this Judgement.

4 On the 25th of April 1986 Mr. Derrot Fitzgerald was appointed Liquidator of the Company in a Creditors Liquidation thereof.

5 The representatives of Carrolls and the Liquidator identified goods supplied by Carrolls in the possession of Bourkes at the commencement of the Liquidation to the value of £7,376.70p. It was agreed between the parties that Carrolls were entitled to those goods in accordance with the retention of title clause and they were accordingly returned reducing the indebtedness of the Company to £47,140.56p.

6 At the time the Liquidator was appointed the Company maintained two accounts with its Bankers. The number one account which was in credit in a sum (expressed in round terms) at £28,000 and the number two account which was overdrawn in a sum (again expressed in round terms) in the sum of £21,000. The number two account aforesaid was the account on which the Bank from time to time advanced the moneys required by Bourkes to pay wages and salaries and the number one account was the only other account of Bourkes. No special account was opened for the purpose of segregating the proceeds of sale of goods supplied by Carrolls. On the 7th of May 1986 the Bank debited the number one account with the amount due to the Bank on foot of the number two account leaving a net balance due to Bourkes of a sum of approximately £7,000. The decision to set off one count against the other was made exclusively by the Bank and was not the result of any disposition made by the Liquidator.

7 The right of a vendor and purchaser to agree that the property in goods agreed to be sold should remain in the vendor not withstanding the agreement for a sale and the delivery of the goods to the purchaser cannot be questioned. The right was recognized in Irish Case Law in the second part of the last century (see Bateman .v. Green and King 1868 I.R. 2 C.L. 166 and McEntire .v. Crossley Brothers Limited 1895 A.C. 457) and affirmed by the provisions of the Sale of Goods Act, 1893 Section 19(1). Accordingly the Liquidator was correct in returning the goods supplied by Carrolls and in the possession of Bourkes at the date when the Liquidator was appointed.

8 The issue in the present case relates to the right of Carrolls in respect of the proceeds of sale of the goods supplied by them. In this context too the basic legal principles are well established. Where a trustee or other person in a fiduciary position disposes of property the proceeds of sale are impressed with a trust which entitle the beneficiary or other person standing in the fiduciary relationship to trace such proceeds into any other property acquired therewith by the trustee. The right of tracing carries with it the presumption that where the substituted property is subsequently diminished it is presumed, not withstanding the order of disposal and the well known rule in Clayton's case that the trustee disposed of his own property in the first instance and encroached subsequently, if at all, upon the property of the benificiary. Whether fiduciary obligations are imposed on one party or another depends in part upon the character in which they contract and partly on the nature of the dealings in which they engage. Obviously one would be slow to infer that a vendor and purchaser engaged in an arms length commercial transaction undertook obligations of a fiduciary nature one to the other. On the other hand if one postulates that in any context one person is selling the goods of another the assumption of fiduciary obligations in relation to the sale and in particular the proceeds thereof might well be appropriate. It seems to me that the question must be asked how does a party come to sell property of which he is not the owner. Is he selling as a trustee in pursuance of a power of sale? Is he selling as the agent of the true owner? Does the sale constitute a wrongful conversion? If any of those questions were answered in the affirmative it seems to me that the law would impose a trust on the proceeds of sale which would confer on the true owner the right to recover those proceeds from the actual seller or if the proceeds were no longer in the sellers hands to trace them into any other property acquired with them. If the new asset was acquired partly with such proceeds and partly with other moneys provided by the seller then the right of the true owner would be to a charge on the new asset or mixed fund to the extent of the proceeds of the sale of his property. This is the rule enunciated in Hallett's Estate Knatchbull .v. Hallett1880 13 CH. 2. 696.

9 In the present case clearly there was nothing wrongful about the sale by Bourkes of the goods supplied by Carrolls. Not merely was this envisaged by the circumstances of the parties but it was positively anticipated in the conditions under which the goods were sold by Carrolls. As appears from the retention of title clause it was expressly provided that in the event of the sale of goods by Bourkes that they should "act on their own account and not as agent for Carrolls".

10 It would seem to me to follow, therefore, that no fiduciary duty was imposed by law on Bourkes or the Liquidator thereof in relation to the proceeds of the sale of any of the goods in question and that if such a fiduciary obligation is to be...