Mjn McNaughton Ltd v Thode Hc Rot
| Jurisdiction | New Zealand |
| Judge | Duffy J |
| Judgment Date | 10 May 2012 |
| Neutral Citation | [2012] NZHC 982 |
| Docket Number | CIV-2011-404-001590 |
| Court | High Court |
| Date | 10 May 2012 |
Under the District Courts Act 1947
[2012] NZHC 982
CIV-2011-404-001590
IN THE HIGH COURT OF NEW ZEALAND ROTORUA REGISTRY
Appeal against District Court decision rejecting claim that appellant had right to recover contract price for timber delivery from director of company in liquidation — company went into liquidation after timber joinery delivered — under agreement appellant retained security interest over goods but there was no express retention of title clause — seized/repossessed goods on default but did not sell them — sought to recover cost of timber from director (respondent) as was guarantor under terms of supply — whether retaining of security interest over the goods manifested an intention against the passing of property on delivery — whether default rules under s20 Sale of Goods Act 1908 (“SOG”)(rules for ascertaining intention) applied — whether placing of restrictions on how the property was to be use damounted to retention of right of disposal under s21 SOG (reservation of right of disposal) and if not, when did the property pass to the buyer (respondent) — whether director was liable to pay the contract price — whether appellant had the right to sue for the contract price despite repossession of the joinery
S J Ropati for the Appellant
G P Blanchard for the Respondent
G P Blanchard P 0 Box 1235 Shortland Street Auckland 1140 for the Respondent
COPY To:
Macky Robelton Limited (M A Robelton) Po Box 37622 (DX CP31503) Parnell Auckland 115 1
JUDGMENT OF Duffy J
The appellant, MJN McNaughton Limited (McNaughton), is a manufacturer of timber joinery. The respondent, Richard James Thode, was a director of Nikau Living Ltd (Nikau), a building company currently in liquidation. In March 2008, McNaughton delivered timber joinery, which it had manufactured, to a building site of a residential building that was being constructed by Nikau. McNaughton was not paid for this joinery.
As Nikau then went into liquidation, McNaughton brought proceedings in the District Court against Mr Thode claiming that it was entitled to recover the cost of joinery from him, as he was a guarantor under the terms of supply between McNaughton and Nikau. McNaughton was unsuccessful and appealed to this Court.
In the District Court, Mr Thode had successfully denied that there was a contract between McNaughton and Nikau to supply the joinery that was delivered in March 2008.
On 21 October 2011, I delivered an interim judgment in which I found at [26] that there was a contract to supply the joinery which McNaughton had delivered to Nikau's building site. At [31] of the interim judgment, I found as follows:
The joinery was delivered some time in March 2008, but Nikau did not pay for the joinery. It was stored on site in a garage and none of it was used in the building project. The appellant discussed with Mr Lamb, who was buying the Victoria Avenue property, the possibility of him purchasing the joinery, but the price he was prepared to pay was not acceptable to the appellant. The sale of the property was to settle in May 2008, but shortly before the settlement date, the appellant removed the joinery from the site. It remains with the appellant.
At [32]–[35] of the interim judgment, I identified what I described as outstanding issues that had not been addressed, either in the District Court or by the parties in the appeal to this Court. I saw those issues as pivotal to the outcome of the appeal. I provided the parties with the opportunity to address those issues. They were also given the opportunity of inviting me to refer the case back to the District Court for rehearing. The parties chose to continue with the appeal and to address the outstanding issues by way of written submissions. Having considered their submissions, I am now in a position to deliver a final judgment. This has been done on the papers. This judgment should be read together with the interim judgment which sets out the factual context in which the dispute between the parties arose.
At [32] of the interim judgment, I found that the first outstanding issue the parties needed to deal with was whether the contract for the supply of the joinery was governed by the Sale of Goods Act 1908 (the SOG Act). The parties now concede that it does; thus, they impliedly accept that the joinery constitutes “goods” for the purpose of that Act.
They also concede that the guarantee given by Mr Thode only covers liability for the contract price and not liability for damages for non-acceptance.
The next question is how to characterise the nature of the breach by Nikau and the liability that arises therefrom. Here, it is important to determine whether property has passed under the SOG Act.
Section 19 of the SOG Act states that property in specific or ascertained goods is transferred to the buyer at such time as the parties to the contract intend it to be transferred, having regard to the terms of the contract, the conduct of the parties and the circumstances of the case. Where the parties have not shown a specific intention, the default rules in s 20 apply.
Usually, if there is an express retention of title clause, that would show an intent for property not to pass until payment were made. Here, the terms of trade under which the joinery was supplied do not contain an express retention of title clause. But they did give McNaughton a security interest over the joinery.
The question, therefore, is whether something less than a retention of title clause could still be interpreted to show the same intent; in particular, whether retaining a security interest over the goods is considered to be reserving a right to the goods so as to manifest an intention against the passing of property on delivery.
In Segard Masurel (NZ) Ltd v Nicol (2008) 10 NZCLC 264,386 (HC), the agreement did not expressly provide that title would not pass until payment is made. The relevant contractual clause contemplated that payment might be made after delivery date, and the seller did not insist on concurrent payment. Cooper J held at [26] that:
When the appellant did not insist on payment on the date of delivery of the wool, it effectively demonstrated an intention to grant credit if the goods were delivered, without requiring payment.
On this basis, Cooper J rejected the argument that the parties intended that property in the wool would not be transferred to the buyer until payment was made. As this meant the parties did not show an intention under s 19, Cooper J went on to consider the s 20 default rules.
Cooper J's conclusion is also supported by the fact that under the Personal Property Securities Act 1999 (the PPS Act), retention of title is not the determinative factor. The fact that a secured party holdsor does not hold title is not critical in terms of the PPS Act's operation: see JS Brooksbank & Co (Australasia) Ltd v EXFTX Ltd (in rec & liq) [2009] NZCA 122 at [46]. So, the fact that there is a clause granting credit is neutral for the purposes of showing intention for title to pass.
Here, under Clause 5.1 of the terms of trade, McNaughton has set a condition that until the goods and services have been paid for in full, Nikau was restricted in its ability to part with possession, sell or otherwise dispose of any of the goods. Clause 5.2 provided that McNaughton has a right under the PPS Act to seize the goods if payment is not made by the due date. Those provisions are to be read in the background of the terms of trade being signed in relation to an agreement granting credit to the buyer. All relevant factors point to a situation similar to that in Segard Masurel, where the intention seems more like one of granting credit than of retaining title, which leads me to conclude that the parties did not clearly manifest an intention under s 19 of the Act of when property is to pass. Thus, the default rules in s 20 must be considered.
Section 20 of the SOG Act sets out different default rules for different types of goods. As the joinery had not been produced at the time of the contract, it would be considered a “future good”, which means a good “to be manufactured … by the seller after the making of the contract of the sale” (s 2(1)). So, the s 20 default rule that is relevant is Rule 5, which provides that:
Unless a different intention appears, the following are rules for ascertaining the intention of the parties as to the time at which the...
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Mjn Mcnaughton Ltd v Thode HC Rot
...HIGH COURT OF NEW ZEALAND ROTORUA REGISTRY CIV-2011-404-001590 [2012] NZHC 982 UNDER the District Courts Act 1947 BETWEEN MJN MCNAUGHTON LIMITED Appellant AND RICHARD JAMES THODE Respondent Hearing: 10 May 2012 (On the Papers) Counsel: S J Ropati for the Appellant G P Blanchard for the Resp......