S. 25. Seller or buyer in pos sale. 25. (1.) Where a person having sold goods continues or is in possession of the goods, or of the session after 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, shall have the same effect as if the person making the delivery or transfer were expressly authorized by the owner of the goods to make the same. S. 25 (1). (2.) 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 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 any lien or other right of the original seller in respect of the goods, shall have 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. (3.) In this section the term "mercantile agent" has the same meaning as in the Factors Acts. Where a person having sold goods, &c.-This sub-section reproduces s. 8 of the Factors Act, 1889 (see Appendix of Statutes, post, p. 327), verbatim, save for the omission after the words "other disposition thereof" of the words "or under any agreement for sale, pledge, or other disposition thereof." S. 8 of the Factors Act, 1889, in its turn, substantially reproduced s. 3 of the Factors Act, 1877 (40 & 41 Vict. c. 39), but extended its operation to the possession of goods as well as of documents, and required that the disposition should be executed by delivery or transfer. The effect of the clause is to extend the doctrine of ostensible ownership to the particular case of a seller "who continues or is in possession of the goods or of the documents of title" thereto, and to confer a good title upon a bond fide second buyer or pledgee, who has obtained a legal title from the original seller by the delivery or transfer of the goods or documents of title (n). The particular case of a seller, who remained in possession of goods sold, and who afterwards dealt with them in fraud of the original buyer, was not provided for, either at common law or under the three earliest Factors Acts (o). At common law, the doctrine of estoppel applied only when the owner of goods had acted so as to clothe the seller with apparent authority to sell or pledge them, and not, as in the present case, when the owner had only remained passive; and the three earliest Factors Acts were expressly confined to the case of an "agent intrusted with the goods," whereas a seller did not fall within that definition (p). The point arose for decision in 1877, in Johnson v. Crédit Lyonnais Co. (g), where the original buyer was held entitled to recover goods in the hands of an innocent pledgee, to whom the seller had fraudulently pledged the goods, and transferred the documents of title. The Factors Act of the same year (40 & 41 Vict. c. 39), was passed with the object (inter alia) of annulling the effect of this decision (r). Although this sub-section is probably intended to apply only to the case of a fraudulent dealing by the original seller with the goods or documents of title, as in the case above quoted, yet it is submitted that it is wide enough in its terms to include the case of an unpaid seller, who, retaining possession of goods, wrongfully re-sells them, e.g., by an unjustifiable exercise of his lien under s. 48 (2), and its effect is to confer a good title upon a second bond fide buyer as against the original buyer, even although the latter may not be in default at the time of the re-sale. See the notes to s. 48 (2), post, p. 266. That this sub-section will be construed according to the natural and ordinary meaning of the words, and not limited to cases of fraudulent transfers by the seller, appears the more probable from the fact that sub-s. 2 has already received judicial interpretation in this spirit (s). In the cases quoted in the note, sub-s. 2 was held to apply to a sale or pledge by the buyer of non-mercantile goods like furniture, in his possession under a "hire and purchase" agreement. Where, however, the sale is by the seller's S. 25 (1). S. 25 (1). (1) The necessary conditions. (i) Seller in possession of goods or documents. mercantile agent, it is possible that this fact may affect the character of the goods sold. See post, p. 164. For the definitions (under both sub-sections) of "goods," "documents of title," "delivery," see s. 62 (1); and of "in good faith," see s. 62 (2); and for the definition of "possession," see Factors Act, 1889, s. 1 (2), Appendix of Statutes, post, p. 325; and of "person," see Factors Act, s. 1 (6), and Interpretation Act, 1889, s. 19. See further, with regard to documents of title, s. 47, post, and the notes thereon. Sub-s. 1 may be shortly stated as follows: : The seller of goods may, as if under an express authority from the owner-i. e., the buyer-sell, pledge, &c. the goods or documents of title, if— (1.) He be in possession of such goods or documents: (2.) The second sale, &c. be executed by delivery or transfer of the goods or documents: (3.) The second buyer, &c. act in good faith and without notice of the previous sale. It is proposed to consider (1) the necessary conditions, (2) the effect of the transaction. Continues or is in possession.-The first condition is that the seller must be in possession of the goods or documents, i. e., he must have the indicia of ownership. It is important to observe that this sub-section, following s. 3 of the Factors Act, 1877, applies not only where the seller has been left by the buyer in possession of the goods or documents of title, but also where the seller has got possession of them after the sale (t), the words being "continues or is in possession." Furthermore, the seller may act if he be in possession of the goods. S. 3 of the Factors Act, 1877, applied only when the seller's possession was of the documents. There is this important distinction between the two cases. When the goods are represented by a document of title, the buyer, who finds it convenient or necessary in the course of business to leave the document in the seller's possession, may secure himself against any subsequent fraudulent disposition on the part of the seller, by having the document specially indorsed to himself, and, when the goods are in the possession of a wharfinger or warehouseman, by having the goods entered in his (the buyer's) name. On the other hand, when the actual goods are left in the seller's possession, it will be necessary for the buyer so to earmark the particular goods sold-e. g., by having them marked with his name as to prevent the seller continuing to be the ostensible (t) As in Stephens v. Wilkinson (1831), 2 B. & Ad. 320; Page v. Cowasjee (1866), L. R. 1 P. C. 127. owner. In some cases this may be a matter of difficulty; and the buyer may be able to protect himself, only by obtaining an immediate delivery of the goods. S. 25 (1). be executed. The delivery or transfer.-The second condition is that the (ii) The transtransaction should be executed. In this respect this sub-section action must differs from s. 3 of the Factors Act, 1877. That section, though possibly the result may not have been intended, applied not only where the second buyer or the pledgee had the document of title transferred to him, but also when the disposition was made without any transfer of the document; the only condition precedent to a valid sale, &c. of the goods or documents laid down by that section being that the seller should be in possession of the documents. Consequently, a person dealing with the seller with regard to the goods might have been even ignorant that the document was in the hands of the latter. The amendment of the law is important, as there seems no reason why the title of the second buyer or of the pledgee, who has not obtained possession of the goods or documents, should be preferred to that of the first buyer; on the contrary, the maxim "Qui prior est tempore potior est jure" should apply when neither party has acquired a legal title. Sale, pledge, or other disposition.-And the transaction to which validity is thus given is "a sale, pledge, or other disposition" of the goods, &c. The first two terms speak for themselves. "Other disposition" was, under the Factors Act of 1825, judicially interpreted as meaning some transaction of the nature of a sale or pledge, the legislature not intending to protect any dealing substantially different therefrom (u). S. 5, however, of the Factors Act, 1889, allows a mercantile agent in possession under s. 2 (1) of that Act to sell or pledge in consideration of the delivery or transfer of other goods or documents; in other words, allows him to barter the goods of his principal, which he could not do at common law. If s. 5 of the Factors Act is to be read with s. 25 (1) of this Act, effect may be given to the phrase "other disposition" by reference to the transaction of exchange, although this Act does not directly apply to exchange of goods (v). By that person, or by a mercantile agent. The person making (u) Taylor v. Kymer (1832), 3 B. & Ad. 320; Taylor v. Trueman (1830), 1 M. & M. 453; and see the notes to s. 47, post, p. 257. (v) In Shenstone v. Hilton, [1894] 2 Q. B. 452, a case decided while this work was passing through the press, S. 25 (1). the delivery or transfer may be the seller or his mercantile agent. So far as dispositions by the seller are concerned, no doubt the authority of Lee v. Butler (x), decided under sub-s. 2, would apply, and a sale or pledge of such goods, as furniture in a private house, i. e., non-mercantile goods, would be valid. Kay, L.J., in the case in question, pointed out that the definition of "goods" in the Factors Acts included more than " wares and merchandise," and the definition in s. 62 (1) of this Act is equally wide. The earlier Factors Acts, on the contrary, dealt only with mercantile transactions (y). But when the seller acts through his agent, the latter must be, according to the express provision of the Act, a "mercantile " one. A mercantile agent is defined by s. 1 (1) of the Factors Act, 1889 (incorporated by sub-s. 3 of this section), as "a mercantile agent having in the customary course of his business as such agent authority either to sell, &c." "The Act applies," says Mathew, J. (z), "only to persons of the class ordinarily carrying on the business of mercantile agents." Accordingly, (1) under the express provisions of this Act, no sale or pledge by the seller's non-mercantile agent would pass a good title; (2) it is submitted that the goods disposed of by the agent must be more or less goods as understood in commerce; in other words, the agent must also be a mercantile agent quá the class of the goods dealt with. The above definition speaks of his authority "in the customary course of his business," and s. 2 of the same Act provides that he should be "acting in the ordinary course of business of a mercantile agent" (a). Both sections appear to contemplate the case of an agent having an authority which is derived from previous dealings with the particular class of goods. 66 If this view be the correct one, it would seem that the word 'goods" must receive a wider or a narrower interpretation, according as the sale or pledge is made by the seller himself or his agent. When the goods are in the possession of a mercantile agent, the editors submit that the goods dealt with by him must be such goods only as, in the ordinary course of his business, he is accustomed to dispose of. And the distinction between the two cases is not unreasonable, as, the object of the Factors Act being to extend the doctrine of ostensible ownership, the character of the person dealing with the goods should conform as closely as possible to that either of an owner, or of an agent having ostensibly plenary authority to dispose of them. (x) [1893] 2 Q. B. 318. (y) Benj. p. 19. (z) In Hastings v. Pearson, [1893] 1 Q. B. 62, under ss. 1, 2, of Factors Act, 1889. (a) See on these words, Hastings v. Pearson, supra. |