Transfer of Title: Appeal Court Upholds Judge Behrens in Trade Electronics

In Trade Electronix Ltd v Best Buy Today (Wholesale) Ltd (In Administration) and Another His Honour Judge Behrens, sitting as a judge of the High Court, had decided that title seller given by administrators under s.24 of the Sale of Goods Act 1979 prevailed over that of a company that had contracted to buy but had not taken delivery of the goods prior to the seller#s administration. Though no intellectual property point arose in that case, it considered issues that arise frequently in all industries including consumer electronics distribution. It is important to note that deals similar to those that are the subject of this litigation are nowadays often made electronically with increasing frequency.

The basic facts were that a Mr Singh of Trade Electronix met a Mr Smith of a wholesaler called Best Buy Today (Wholesale) Ltd at Best Buy's warehouse in Leeds and agreed to buy for £150,000 a stock of returned of returned goods that Best Buy had intended to buy from Argos. The purchase from Argos was to be funded by Davenham Trade Finance Ltd which purchased the goods and invoiced them to Best Buy. Before Best Buy could deliver the goods to its customer it went into administration leaving them in Davenham's possession which sold them on.

Trade Electronix sued the administrators and Davenham for wrongful interference with goods. Dismissing the claim the judge relied on s.24 of the Sale of Goods Act 1979, which provides:

"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, has 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"

Trade Elelctronix appealed on the ground that .the goods had never entered into Davenham's possession.

The Court upheld Judge Behrens's decision but on the ground that there had been no binding contract between Trade Electronix and Best Buy. A very unfortunate result for Trade Electronix which lost a bargain through no fault of its own.

The Lord Justices' decision appears to be based entirely on an analysis of correspondence between Mr Smith and Mr. Singh resolves none of the uncertainties produced by s.24. The only way that a purchaser can protect itself is by removing the goods as soon as it buys them. Not always easy when they are resold several times in quick succession.