Page 1
Malayan Law Journal Articles/1993/Volume 3/'POSSESSION' REVISITED : SECTION 30 OF THE SALE OF
GOODS ACT 1957
[1993] 3 MLJ xvii
Malayan Law Journal Articles
1993
Wu Min Aun
Associate Professor & Vice-Dean Faculty of Law, Northern Territory University, Darwin, Australia
A landmark case in the Australian High Court appears to have gone unnoticed in Malaysia. Gamer's Motor
Centre (Newcastle) Pty Ltd v Natwest Wholesale Australia Pty Ltd 1 revisited the area of 'possession' under ss
5 and 28 of the Sale of Goods Act 1923 (New South Wales) and overturned traditional legal views on its meaning. It dispels the notion that a second purchaser must take actual physical delivery of the goods from a seller or buyer in possession of goods after sale in order to acquire good title binding on the first buyer. The parallel provisions in Malaysia are ss 2 and 30 of the Sale of Goods Act 1957 (Rev 1989). Being a decision of the highest court of appeal in Australia, it is likely to have a strong impact on local legal thinking given that the provisions have yet to receive judicial attention. This article seeks to examine the legal ramifications of that case in the context of s 30 of the local Act and to draw some conclusions from it.
The nemo dat rule and s 30 exceptions
Section 27 of the Sale of Goods Act 1957 enacts the common law rule that a sale of goods by a person who is not the owner and who sells without the authority or consent of the owner confers no better title than the seller has, unless the owner is by his conduct precluded from denying the seller's authority to sell. Where the same goods are sold a second time, the court is often called upon to adjudicate as to the true owner. Whatever decision is made, inevitably one of two innocent parties bears the loss. In Bishopsgate Motor Finance
Corporation Ltd v Transport Brakes Ltd , 2 Denning LJ said:
In the development of our law, two principles have striven for mastery. The first is the protection of property: no one can give a better title than he himself possesses. The second is for the protection of commercial transactions: the person who takes in good faith and for value without notice should get a good title. The first principle has held sway for a long time, but it has been modified by the common law itself and by statute so as to meet the needs of our own times.
3
The first principle is enacted in s 27 and is commonly known as the nemo dat rule whereas the second principle is found in s 30 which comprises two subsections providing statutory exceptions to the nemo dat rule.
Both exceptions are statutory inroads into the long established rule originating at common law that a transferor of goods could give no better title than he himself possessed. In a nutshell, s 30(1) affords protection to those who buy goods from a seller who, having sold them, continued in possession of them after sale, and s
30(2) affords protection to those who deal with a buyer who, having bought or agreed to buy goods, obtained possession of them or their documents of title. In both instances, the goods are resold to a second buyer acting in good faith and without notice of the earlier sale. In the words of Lord Pearce, they have 'the object of mitigating the asperity of the common law towards an innocent party purchasing goods from a person who has all the trappings of ownership but in truth has no proper title to the goods'. 4 Both subsections are companion provisions and although there are differences, they are not material to the issues in this article.

Page 2
Gamer's Motor Centre case
The brief facts of Gamer's Motor Centre may now be stated. Gamer's Motor Centre, a wholesaler, sold motor vehicles to retail dealers, one of whom was Evan & Rose Motors. This dealer had a floor plan agreement for the financing of their inventory of used cars similar to the plan in Pacific Motor Auctions . Natwest was the party financing the dealer's transaction. The dealer, as buyer, took delivery of eight vehicles from Gamer's
Motor Centre on the term that they should be paid for within seven days. The eight vehicles were then financed by Natwest, who became the new owners, but the dealer was permitted to retain possession of the vehicles as Natwest's bailee, pending sale in the course of the dealer's business. At no time did the vehicles leave the dealer's possession. Natwest issued cheques to the dealer for 90% of the value of the eight vehicles. Gamer's Motor Centre was not paid and so they seized the vehicles. Natwest brought action against them in detinue and conversion. The case came before the High Court by way of special leave, on appeal from the decision of the New South Wales Court of Appeal.
The main question to be determined largely depended on whether the word 'delivery', appearing in s 28(2) of the New South Wales Act, meant actual delivery or whether it included constructive delivery. By a majority, 5 the High Court held that 'delivery' for the purpose of s 28 of the New South Wales Act involved a change of possession that might be effected by constructive or symbolic delivery not amounting to actual physical delivery. The dealer was in actual possession of the goods, having agreed to buy them from Gamer's Motor
Centre. The character of that possession had changed when Natwest paid 90% of the purchase price. According to their Honours, the dealer, through constructive delivery to Natwest, had become its bailee. Accordingly, the dealer, as a buyer in possession of the goods with consent of the seller, could pass a good title to Natwest, a third party acting in good faith and without notice of the prior sale.
3 MLJ xvii at xix
First, that case, read with Pacific Motor Auctions , confirms the view that the word 'possession' appearing in s
28(1) and (2) of the New South Wales Act, which correspond with s 30(1) and (2) of the local Act, bears the same meaning, that is, actual custody of the goods or documents of title to them. In other words, a seller or buyer in possession of the goods after sale must have actual custody of goods or the documents of title regardless of the capacity in which the goods are held (for example, as bailee). Secondly, the challenge to the orthodox view occurs when it was decided that the word 'possession' appearing in s 5 of the New South
Wales Act wherein a definition of 'delivery' is contained, bears a different meaning. For Australia, it seems clear that the case is now authority for the proposition that the word 'possession' appearing in different parts of the Sale of Goods Act may bear different meanings, namely, ss 5 and 28 of the New South Wales Act which correspond to ss 2 and 30 respectively, of the local Act.
The word 'delivery' is defined to mean 'voluntary transfer of possession from one person to another'. The majority of judges held that 'delivery' for the purpose of s 28(2) retains its broader juridical definition and involved a change of possession that might be effected by constructive or symbolic delivery not amounting to actual physical delivery. In the words of Mason CJ:
... the word 'delivery' is defined in terms of its legal meaning. There is therefore a strong foundation for the conclusion that the statutory definition of 'delivery' referred to 'possession', not in its popular sense or as meaning actual custody, but in its legal or technical sense.
6
The Chief Justice rejected the argument that the word 'possession' should be given its common or ordinary meaning as actual physical custody. In his view, the definition of 'delivery' was designed to identify or describe the act which passes title to goods as between seller and buyer. It was not concerned with the method by which possession of the goods was originally obtained by the seller or buyer in possession.
7 This decision affirms the majority views of Priestley and McHugh JJ in the New South Wales Court of Appeal 8 that the references in s 28(2) of the Act to delivery included constructive delivery as well as physical delivery, and that there was a constructive delivery by the dealer to Natwest of the eight vehicles with the consequence that title passed to Natwest.
To further support his decision, Mason CJ argues that the inclusion in s 28(2) of constructive delivery was consistent with the object of that section, that is, the protection of an innocent third party dealing with a seller or buyer in possession of goods or the documents of title, and therefore, appearing to be the owner of goods.

Page 3
Accordingly, that object requires that the word 'possession' should be construed as actual custody, but his
Honour added:
... these considerations have no application at all to the statutory definition of 'delivery' which is designed to identify or describe the acts which passes title to goods as between seller and buyer.
Indeed, to treat 'delivery' as embracing constructive delivery is to enhance the protection given by s 28(2) to the innocent purchaser. There is no valid reason why his title should depend upon actual, as distinct from constructive, delivery.
The mischief aimed at is a sale by a buyer in possession of goods or documents of title who is not the owner of them, the object being to protect the sub-buyer who is deceived by the appearance of ownership arising from possession.
There is no point in confining the protection to the sub-buyer who takes under actual delivery.
9
A majority of the Australian High Court felt that there could be no warrant for construing the word 'possession' in the statutory definition of 'delivery' by reference to the word 'possession' in s 28, having regard to the quite different context in which the word appears.
The orthodox view
The orthodox pre-Gamer's view is that in a resale by either a seller in possession or a buyer in possession of the goods or the documents of title, a second buyer from either party must take delivery through actual possession. This is regarded as the only way to override the title of the first buyer from the seller in possession or, in the case of a buyer in possession, to override the title of the seller. Constructive delivery for the purpose of transferring title to the second buyer seems unacceptable. Various authorities spanning different common law jurisdictions appear to support this position.
First, in the English case of Nicholson v Harper , 10 a merchant owned wine stored in the cellars of a warehouseman. The merchant sold 250 dozen to the plaintiff who left them with the warehouseman. Later, the merchant pledged all the wine to the warehouseman for advances made by the latter in good faith and without notice of the previous sale. He subsequently became insolvent. The court held that the plaintiff was entitled to succeed under the first sale because there was no delivery to the warehouseman as required under s
25 of the English Sale of Goods Act 1893. It was held that the merchant was a seller who had continued in possession of the goods after sale, but there had been no delivery or transfer of possession to the warehouseman after the sale. The warehouseman was in possession of the wine throughout both transactions.
The second case, from Australia, is Bank of New South Wales v Palmer . 11 That case concerned a boat builder who gave to the plaintiff bank a bill of sale over a boat which he was building for the defendant. Under another agreement with the defendant, it was provided that the property in the boat was to pass to the defendant from the commencement of construction. The plaintiff was misled as to the arrangements with the defendant because the boat builder had asserted that he was the owner of the boat. The boat builder retained possession of the boat that was being built throughout the period of construction. Upon his bankruptcy, the plaintiff bank attempted to take possession of the boat. It failed because the court in the state of New
South Wales held that the exception did not apply. Helsham J ruled that the words of the section must be read in a way that restricted 'delivery' to cases in which there is a 'change in physical possession of the goods or title deeds'. 12
In New Zealand, Nicholson v Harper and Bank of New South Wales v Palmer were applied in NZ Securities
& Finance Ltd v Wrightcars Ltd . 13 In that case, the purchaser of a motor car, who was in possession with the consent of the seller before payment, purported to sell the car to an innocent third party, claiming that the car was unencumbered. He then leased it back from the third party. At all times, he retained possession of the car. O'Regan J agreed with both the construction and the reasons given by Helsham J in Bank of New South
Wales v Palmer , 14 and held that the exception had not been made out.
From the three authorities cited above, it would appear that the word 'possession' as defined in 'delivery' refers to physical possession. Helsham J in particular, having considered the words 'the delivery or transfer ... of the goods or documents of title under any sale' appearing in the New South Wales provision, rejected the notion of constructive delivery. This view can no longer stand in light of the majority decision in Gamer's Motor Centre that a constructive or symbolic delivery falling short of actual delivery suffices.

Page 4
Mason CJ examined all three authorities cited in support of the orthodox view. In respect of Nicholson v
Harper , 15 the Chief Justice pointed out that the case did not decide that s 28 contemplated actual delivery.
Constructive delivery was not an issue. It merely decided that there must be a delivery or transfer in addition to the sale. 16 However, in Bank of New South Wales v Palmer , 17 Helsham J did conclude that 'delivery' in s
28 is restricted to a 'change in physical possession of goods or title deeds'. This view was applied by O'Regan J in NZ Securities & Finance Ltd v Wrightcars Ltd.
18 These authorities were obviously not binding on the
Australian High Court but nonetheless, Mason CJ pointed out that Justice Helsham's conclusion was not supported by the reason assigned for it. Rather, the reasoning supported no more than the limited conclusion reached in Nicholson v Harper that there must be a delivery apart from the sale, pledge or other disposition.
That being the case, NZ Securities & Finance Ltd v Wrightcars Ltd was also tainted since O'Regan J followed the principles of Nicholson v Harper . In short, all three cases were rejected as authorities on the question of constructive delivery. Three other judges of the High Court agreed with the reasoning of Mason CJ, 19 that 'delivery' was capable of embracing constructive delivery. Brennan J stated:
... there could be no warrant for construing the word 'possession' in the definition of 'delivery' in s 5(1) by reference to the word 'possession' in s 28, having regard to the quite different context in which it appears.
20
In contrast, Toohey J, dissenting, was of the view that the earlier cases were properly decided. He felt that
'delivery' for the purpose of s 28(2) refers to actual delivery to a third party. That, in his view, was implicit in the judgment of North J in Nicholson v Harper and explicit in the judgments of Helsham J in Bank of New
South Wales v Palmer and O'Regan in NZ Securities & Finance Ltd v Wrightcars Ltd . 21
Constructive delivery
Section 2 of the local Act, like its New South Wales equivalent, defines delivery as a 'voluntary transfer of possession from one person to another'. Section 30 provides two exceptions to the nemo dat rule and reads:
(1)
(2)
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 shall have 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.
Where a person, having bought or agree 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 the 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 effect as if such lien or right did not exist.
Like their Australian equivalent, s 30(1) above deals with a seller in possession after sale while s 30(2) deals with a buyer, who having bought or agreed to buy goods, obtains possession with the consent of the seller.
The Privy Council in Pacific Motors Auction Pty Ltd v Motor Credits (Hire Finance) Credit Ltd , 22 in its deliberation of s 28(1) of the New South Wales Act, held that a person is in possession of goods when he or she has the goods in actual custody, that is, manual or physical control. It went on to opine that the expression
'continues ... in possession' was intended to refer to the continuity of physical possession regardless of any private transactions between the seller and the purchaser which might alter the legal title under which possession was held.
23 This proposition also applies to s 28(2).
That decision was followed by the Australian High Court in Mercantile Credits Ltd v FC Upton & Sons Ltd &
Commonwealth Development Bank of Australia . 24 In that case, a manufacturer of heavy industrial plant sold a tractor then on its premises to the appellant, Mercantile Credit. The sale was for cash and the price paid by the appellant. The appellant then gave the tractor on hire by a lease agreement to another finance company which was a company associated with the seller and had its registered office at the same premises. The tractor remained on the premises of the seller throughout. No physical change in its custody or possession took place. While the tractor was still on the premises, the seller resold it a second time to the Commonwealth Development Bank, the second respondent, who in turn hired it to FC Upton & Sons Ltd, the first re-

Page 5 spondent. At the direction of the second respondent, the seller delivered the tractor to the first respondent.
When this transaction was discovered, the appellant, as the first buyer, sued the two respondents for wrongful possession and detention of the tractor.
The respondents set up in defence, inter alia, s 27(1) of the Queensland Sale of Goods Act 1896. That provision corresponds with s 30(1) of the local Act. They claimed that the manufacturer who sold them the tractor was a seller who had retained possession after the sale, and they had purchased it in good faith and without notice of the earlier transaction. All five judges sitting on appeal unanimously ruled that the relevant law was well settled and the case was clearly one for the application of the exception. Barwick CJ reaffirmed:
The policy of the legislation is to protect those who deal with a seller who has retained physical possession of the thing sold, his possession being rightly taken as indication of ownership. 25 This view of the law had also been earlier accepted by the English Court of Appeal in Worcester Works Finance Ltd v Cooden Engineering Co Ltd 26 although strictly speaking, Pacific Motors Auctions was not binding on it. It would appear that Gamer's Motor Centre does not affect the interpretation of the word 'possession' appearing in s 30 of the local Act. The word 'possession' appearing in s 30 is concerned with the precondition of the operation of each of the subsections.
However, s 30 requires that in addition to 'possession' by the seller or buyer of the goods after sale or documents of title, there must be 'delivery or transfer' to a sub-buyer purchasing in good faith and without notice of the original sale. In other words, the seller or the buyer in physical possession of the goods or the documents of title must necessarily deliver or transfer the same to the second buyer. The word 'delivery' is read as exclusively referable to 'goods' and 'transfer' as referable to 'documents of title'. 27 The statutory definition of 'delivery' in s 2 necessarily includes actual physical transfer of the goods or the documents of title to the sub-buyer, but does it also include constructive delivery? It is now clear from Gamer's Motor Centre that constructive delivery is acceptable.
Conclusion
Clearly, Gamer's Motor Centre is a significant case for several reasons. First, it rejects the orthodox view suggested to have emanated from such cases as Nicholson v Harper that actual physical custody of goods or documents of title is essential for the purpose of 'delivery' in both s 30(1) and (2). Constructive delivery to a third party acting in good faith and for value suffices. Constructive delivery for this purpose simply involves a change in the character of the transferor's possession without the need for actual physical transfer of possession to the third party. Secondly, it confines the application of Nicholson v Harper and Bank of New South
Wales v Palmer to the proposition that in the operation of s 30(1) and (2), there must be some delivery to the second buyer after the original sale. By restricting the rule laid down in Pacific Motor Auctions to the way in which the seller or buyer acquires possession of the goods rather than the question of delivery, it becomes clear from the majority decision that delivery for the purpose of transfer of title to a bona fide third party buyer for value extended to constructive delivery. Thirdly, Gamer's Motor Centre is consistent with the purpose of s
30 which is the protection of innocent third party purchasers.
28 For the average consumer, the construction of
'delivery' to include constructive delivery affords a more adequate measure of protection. It is also more consistent with the other exceptions to the nemo dat principle, in particular estoppel and s 29. These exceptions, intended to protect the innocent buyer, do not require an actual delivery to him or her. The buyer is protected as from the moment of sale, provided the price is paid or he has acted to his prejudice so as to constitute himself a bona fide purchaser for value. 29 In respect of s 30(2), it appears that a second buyer is protected even though he has only 'agreed to buy goods'. Since he is protected despite the fact that the property in goods has not yet passed to him, it would be strange indeed to argue that there must be actual physical delivery to him. 30
1 (1987) 163 CLR 236
2 [1949] 1 KB 322.
3 Ibid at pp 336-337.
4 Pacific Motor Auctions Pty Ltd v Motor Credits (Hire Finance) Ltd (1965) 112 CLR 192 at p 199; [1965] AC 867 at p 882.

Page 6
5 Mason CJ, Brennan, Dawson JJ; Toohey and Gaudron JJ dissenting.
6 Supra n 4 at p 244.
7 Ibid at pp 248-249.
8 [1985] 2 NSWLR 475.
9 Ibid at p 249.
10 [1895] 2 Ch 415.
11 [1970] 2 NSWR 432.
12 Ibid at p 536.
13 [1976] 1 NZLR 77.
14 Ibid at p 82.
15 Supra n 10.
16 Supra n 10 at p 418.
17 Supra n 11.
18 Supra n 13.
19 Brennan, Dawson and Gaudron JJ.
20 Supra n 1 at p 337.
21 Ibid at p 269.
22 Supra n 4.
23 Ibid at p 204.
24 (1974) 48 ALJR 301.
25 Ibid at p 303.
26 [1972] 1 QB 210.
27 In the case of bearer documents, they may be transferred by delivery alone.
28 Atiyah PS in The Sale of Goods (1990), Pitman, at p 374 preferred Gamer's Motor Centre to Nicholson v Harper . In his view, the policy of the Act suggests that the second buyer who pays the price of the goods is acting in reliance on his belief that the original seller retains title, having regard to his continued possession of the goods.
29 Ibid.
30 See comments by Atiyah PS, ibid.