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S. 47.

Effect of

transfer of documents as between original seller and buyer.

of the transferor of a bill of lading, a title to the goods represented by the document.

To any person as buyer or owner. As the clause operates solely. to defeat an unpaid seller's lien or right of stoppage in transitu, the original transfer must be, either from a seller to a buyer,` or from a person "in the position of a seller," under s. 38 (2), e.g., a consignor to a consignee. The consignor who has bought goods on his own credit, but on his principal's account, is, for the purpose of exercising the right of stoppage in transitu, in the same position as a seller quoad his principal, and it is conceived that the words" or owner" were added in contemplation of this case. And that person transfers.-S. 47 deals only with transfers of documents of title from a buyer, or person in the position of a buyer, and does not change the law as between the original seller and buyer. As between these parties, the common law distinction between bills of lading and other documents still applies, and a transfer of one of the last mentioned to the buyer well not divest the seller's lien without an attornment of the bailee in possession of the goods or actual possession by the buyer (a), whereas the transfer of a bill of lading will mero motu divest it. With regard to stoppage in transitu, neither at common law nor under this section is the right defeated by a transfer of a bill of lading as between seller and buyer (b); nor is it so defeated by the transfer of any other document to the buyer, or over again by him, at common law. It is now otherwise under this section with regard to the latter documents when re-transferred.

Who takes the document in good faith." In good faith" is defined by s. 62 (2) as "honestly... whether negligently or not." The definition, which is reproduced from the Bills of Exchange Act, 1882, is based upon the distinction pointed out by Lord Blackburn in Jones v. Gordon (c), between honest blundering or carelessness, and dishonest refraining from inquiry.

The transfer will be valid, as it was at common law before the statute, if the transferee honestly believes that there are no circumstances which render the document of title not fairly and honestly assignable (d). The fact that the transferee refrained from inquiring into the circumstances attending the transfer is

(a) Benj. pp. 826, 838.

(b) Unless the transfer is evidence
that the ship was meant to be the
destination of the goods.
Cave, J., in Bethell v. Clark (1887),
19 Q. B. D. p. 562; and In re Bruno,

See per

Silva & Son (1887), 56 L. T. N.S. 577. (c) (1877), 2 Ap. Ca. at p. 628.

(d) Salomons v. Nissen (1788), 2 T. R. 681; Vertue v. Jewell (1814), 4 Camp. 31.

relevant to prove the absence of "good faith," but does not in itself amount to dishonesty (e). If the transferee knows that the original buyer or consignee has become insolvent the transfer is invalid; but it is otherwise when the transferee merely knows that the price of the goods remains unpaid, and consequently that the unpaid seller's rights still exist, because selling on credit is in the ordinary course of mercantile dealing (ƒ).

For valuable consideration.-Includes apparently an antecedent debt.

ILLUSTRATION.

A. sells to B. a shipment of nuts. B., being already indebted to C., transfers to him the bill of lading of the nuts by way of securing the debt. C. receives the bill of lading in good faith. B. becomes insolvent before the ship arrives. A.'s right of stoppage in transitu is lost. Leask v. Scott (1877), 2 Q. B. D. 376 (g).

It is observable that this section appears to cover part of the same ground covered by s. 25 (2) (h), as it includes the particular case of a buyer obtaining possession of a document of title with the consent of the seller. The two sections, however, appear to differ in this way, that s. 25 (2) contains a proviso as to notice, which is not found in s. 47; moreover, as has been shown under s. 25 (2), and supra under this section, notice of a lien would be fatal under the former section, but not necessarily so under the latter. With regard to sales, the effect of the transaction on the seller's rights appears identical, and so also with regard to pledges, bearing in mind the right of redemption given to the seller by s. 12 (2) of the Factors Act, 1889 (Appendix of Statutes, post, p. 327).

Transfer was by way of sale.-When a sub-sale takes place, and a document of title has been absolutely transferred by the buyer to the sub-buyer, the unpaid seller's rights are wholly defeated when the price has been wholly paid by the sub-buyer before the original seller attempts to exercise them (i). The question has, however, been raised whether, when the price has not been wholly

(e) Peek v. Derry (1889), 14 App. Ca. 337.

(f) Per Cur. in Cuming v. Brown (1808), 9 East, 506, 515; cf. Rodger F. Comptoir d' Escompte (1868), L. R. 2 P. C. 393; Vertue v. Jewell, supra, per Lord Ellenborough.

(g) Where the Court of Appeal disapproved of the decision of the Privy Council to the contrary in Rodger v. Comptoir d' Escompte, supra. Note that the decisions of the Judicial

Committee, although entitled to great
weight, are not binding in English
Courts.

(h) See the notes to s. 25 (2), ante,

p. 168.

(i) Lickbarrow v. Mason (1793), 1 Sm. L. C. 737; Benj. p. 889. The original seller's rights are equally defeated when the buyer has obtained the document by fraud, but with the seller's consent. Pease v. Gloahec (1866), L. R. 1 P. C. 219.

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S. 47.

Semble, no right of stoppage against the purchasemoney of a sub-sale.

paid, the original seller may exercise his right of stoppage by intercepting, to the extent of his own unpaid purchase-money, the part of the price remaining unpaid in the hands of the sub-buyer. It has been twice decided by the Court of Appeal that he may do so (i), on the ground that the original seller can exercise his right without interfering with the rights of the subbuyer. On the appeal to the House of Lords in Ex parte Falk (i), it became unnecessary to decide the point in question, because it was disclosed on the appeal that the sub-sale had in fact taken place without any transfer of a document of title (k). Lord Selborne, however, took occasion to dissent from the rule laid down by the Court of Appeal in Ex parte Golding, Davis & Co. (i). He assented to the proposition (), "that where the sub-purchasers get a good title as against the right of stoppage in transitu, there can be no stoppage in transitu as against the purchase-money payable by them to their vendors; at all events, until I hear authority for that proposition, I am bound to say that it is not consistent with my idea of the right of stoppage in transitu that it should apply to anything except to the goods which are in transitu.”

Lord Selborne's opinion has, apparently, been adopted by this Act, which speaks of the seller's right being defeated. It is submitted that this view undoubtedly accords with the principles of stoppage in transitu. The alleged right to intercept the unpaid purchase-money was stated by the Court of Appeal, in the cases above referred to, to be only an extension of the principle of In re Westzinthus and Spalding v. Ruding (Illustrations, post, p. 263), where there was a pledge of the bill of lading. But in both those cases the buyer transferred a special property only in the goods by pledging the bill of lading, and it was possible to give effect to the right of stoppage in transitu, as against the general property in the goods which remained in the buyer (m). The principle of those cases has no application when the buyer has resold the goods, or transferred the document of title to a sub-buyer, because ex hypothesi all the property in the goods has passed from the buyer, and nothing remains to which the right of stoppage can attach.

To defeat the seller's rights a document of title must have

(i) Ex parte Golding, Davis & Co. (1880), 13 Ch. D. 628, see per Cotton, L.J., at p. 638; Ex parte Falk (1880), 14 Ch. D. 446, see per Bramwell, L.J., at p. 457.

(k) Kemp v. Falk (1882), 7 Ap.

Ca. 573.

(1)7 Ap. Ca. at p. 577. The other law lords declined to express an opinion upon the point.

(m) See on this point Burdick v. Sewell (1884), 10 Ap. Ca. 74.

been actually transferred to the sub-buyer; it is not sufficient that the document has been originally made out in the sub-buyer's name, but not transferred to him (n).

S. 47.

remains for

surplus after

pledge is satisfied;

Transfer was by way of pledge. "The seller's rights of Seller's right stoppage in transitu may be defeated in part only, for the bill of stoppage of lading [or other document of title] may be transferred as a pledge or security for the debt, and then in general the property in the goods remains in the buyer; but even if by agreement the property in the goods has been assigned as well as the possession, it is only a special property that is thus transferred, and the general property remains in the buyer (o). On these grounds, therefore, the seller's right of stoppage will remain, so far as to entitle him to any surplus proceeds after satisfying the creditor to whom the bill of lading was transferred as security; and the seller will have the further equitable right of insisting on marshalling the assets; that is to say, of forcing the creditor to exhaust any other securities held by him towards satisfying his claim before proceeding on the goods of the unpaid seller" (p).

ILLUSTRATIONS.

1. A. sells and consigns goods worth 1,8007. to B. B. transfers the bill of lading to C. to secure an advance of 1,000l. B. becomes insolvent, and A. stops the goods. A. is entitled thereto after paying 1,000l. to C. Spalding v. Ruding (1843), 6 Bea. 376; S. C., on appeal, 15 L. J. Ch. 374.

2. A. sells goods to B., who consigns them to C., his agent. B. indorses the bill of lading to a bank to secure an advance. During the transit C. sub-sells the goods to D., but without transferring to him a document of title (q). Before delivering to D., A. stops the goods. C. then hands to the bank the proceeds of the sub-sales. A. is entitled to the balance of the money after the bank's claim has been satisfied. Kemp v. Falk (1882), 7 Ap. Ca. 573.

3. A. sells and ships to B. twenty-three casks of oil, and sends him the bill of lading. B. indorses the bill of lading to C. as security for an advance, and also as further security for previous advances made on other goods of B. then in C.'s possession. A. stops the goods in transit. A. is entitled to call upon C. to satisfy his debt out of the proceeds of other goods of B. previously in C.'s possession, before he realizes the casks of oil. In re Westzinthus (1833), 5 B. & Ad. 817 (r).

Or other disposition for value.-See ante, p. 257, other disposition."

(n) Ex parte Golding, Davis & Co. (1880), 13 Ch. D. 628.

(a) Burdick v. Sewell (1884), 10 App. Ca. 74.

(p) Benj. p. 892. As to marshalling assets in Equity, see notes to Aldrich y. Cooper, 2 Tud. L. C. 82, 95 (ed. 1886).

S. V.,

"sale or

"cash

(a) The document was a
receipt," on production of which the
goods were delivered to the sub-
buyer. See per Lord Blackburn at
p. 584 of the report.

(r) For the same principle, see
also Ex parte Salting (1883), 25 Ch.
D. 148.

and he may force pledgee to marshal

the assets.

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48.-(1.) Subject to the provisions of this section, a contract of sale is not rescinded by the mere exercise by an unpaid seller of his right of lien or retention or stoppage in transitu.

"There can no longer be a reasonable doubt that the true nature and effect of this remedy of the seller (stoppage in transitu) is simply to restore the goods to his possession, so as to enable him to exercise his rights as an unpaid seller,-not to rescind the sale" (s).

Although the point seems never to have called for decision, the opinion has been expressed, both by judges and text-writers, more especially since 1819 (t), that the true effect of stoppage in transitu is to replace the seller in the same position as if he had not parted with the possession, and entitle him to hold the goods until payment of the price in other words, to revest his lien, but not to entitle him to rescind the contract (u). On the other hand, it has been directly decided that the seller's lien, whether original or revested, is only the right to detain the goods sold until the price is paid, and not a right to rescind the contract (r). As an application of this principle, the trustee of a bankrupt buyer has been held entitled to recover nominal damages on account of the seller's breach of contract by stopping delivery after the insolvency of the buyer, a decision based upon the assumption that the contract had not been rescinded by the seller's subsequent exercise of his right of retention (y). This clause of the Act, therefore, is only declaratory of a principle which had been previously recognized in a catena of cases.

Subject to the provisions of this section--I. e., the case of a re-sale under sub-s. 4, infra.

(8) Benj. p. 898.

(t) The date of Goodhart v. Lowe, 2 Jac. & W. 349, referred to by Cairns, L.J., in Schotsmans v. Lancashire and Yorkshire Ry. Co. (1867), 2 Ch. Ap. at p. 340.

(u) Wentworth v. Outhwaite (1842), 10 M. & W. 436; diss. Abinger, C.B.; per Lord Chelmsford in Page v. Cowasjee (1866), L. R. 1 P. C. 127; per Cairns, L.J., in Schotsmans v. Lancashire and Yorkshire Ry. Co. (1867), 2 Ch. Ap. 332; per Lord Blackburn in Kemp v. Falk (1882),

7 Ap. Ca. at p. 581; per Cotton, L.J., in Phelps v. Comber (1885), 29 Ch. D. at p. 821; cf. ss. 106, 107 of the Indian Contract Act.

(x) Martindale v. Smith (1841), 1 Q. B. 389.

(y) Valpy v. Oakeley (1851), 16 Q. B. 941; 20 L. J. Q. B. 380; followed in Griffiths v. Perry (1859), 1 E. & E. 680; 28 L. J. Q. B. 204 (both cases of the seller's right of retention or of withholding delivery—a right analogous to stoppage in transitu).

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