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CISG CASE PRESENTATION

Australia 28 April 1995 Federal Dist. Ct., Adelaide (Roder v. Rosedown)
[Cite as: http://cisgw3.law.pace.edu/cases/950428a2.html]

Primary source(s) for case presentation: Case text

Case Table of Contents


Case identification

DATE OF DECISION: 19950428 (28 April 1995)

JURISDICTION: Australia

TRIBUNAL: Federal Court, South Australian District, Adelaide

JUDGE(S): Van Doussa

CASE NUMBER/DOCKET NUMBER: SG 3076 of 1993; FED No. 275/95

CASE NAME: Roder Zelt- und Hallenkonstruktionen GmbH v. Rosedown Park Pty Ltd et al

CASE HISTORY: Further ruling on related aspects of this case delivered by Judge Van Doussa on 30 November 1995 (No. SG 3076 of 1993; FED No. 1049/95; BC 9501975)

SELLER'S COUNTRY: Germany (plaintiff)

BUYER'S COUNTRY: Australia (defendant)

GOODS INVOLVED: Tent hall structures


Case abstract

AUSTRALIA: Federal Court, South Australian District, Adelaide 28 April 1995

Case law on UNCITRAL texts (CLOUT) abstract no. 308

Reproduced with permission from UNCITRAL

A German seller of large scale tents and marquees, plaintiff, sold tents to an Australian buyer, defendant. Under the contract, the buyer had to pay for the tents by instalments. However, as the buyer was in acute financial difficulty, it fell in arrears with its payments to the seller. Subsequently, it was placed under administration in accordance with the Australian Corporations Law. The seller sued the buyer and the administrator, claiming that it had retained ownership of the tents by virtue of a retention of title clause in the contract with the buyer, and seeking an order for the tents to be returned to it and for damages to be paid.

The court ruled that the question whether the contract contained a retention of title clause was a question of fact to be determined on the basis of articles 8, 11, 15(1) and 29(1) CISG, and that the validity of the retention of title clause had to be determined in accordance with the appropriate domestic law, as the CISG was not concerned with property rights (article 4 CISG). The court further ruled that the contract contained an effective retention of title clause in the seller's favour, which was a valid clause pursuant to the appropriate domestic law.

The court found that the seller was entitled to avoid the contract under articles 61 and 64 CISG due to the appointment of the administrator by the buyer, which constituted a fundamental breach of the contract within the meaning of article 25 CISG. The placement of the buyer in administration resulted in such detriment to the seller as to substantially deprive it of what it was entitled to expect under the contract. In addition, the court found that the administrator, who was by virtue of that position constituted as agent of the buyer, had been asked by the seller to return the tents to it, but the administrator had refused to do so, denying that there was any retention of title agreement in the contract. This also amounted to a fundamental breach of the contract.

The court noted that prior to the administrator's appointment, the buyer was in breach of the contract in that interest payments were overdue. However, the seller had neither demanded payment nor fixed an additional period of time for performance of its obligations by the buyer pursuant to article 63 CISG. Therefore, the court concluded that this breach of contract by the buyer did not constitute a fundamental breach that would justify avoidance of the contract.

The court held that the seller, by filing a statement of claim with it, had satisfied the condition for an effective avoidance of the contract required by article 26 CISG, namely to give notice of avoidance to the other party.

The court determined that the contract included a valid retention of title clause, whereby title to the goods did not pass to the buyer until the purchase price had been paid in full and that the seller was entitled to immediate re-possession of the tents as from the time when the buyer's creditors approved a Deed of Company Arrangement for the restructuring of the buyer's business and the payment of its debts.

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Case abstract

Prepared by Robert Koch for commentary on fundamental breach

"The insolvency of the buyer and the subsequent appointment of an administrator were found to have been a fundamental breach . . . A German company sold tent hall structures to an Australian firm specializing in major events, such as the Australian Grand Prix and other large festivals. The buyer agreed to pay for the goods according to a set schedule but fell behind in its payments and, having encountered other financial difficulties, was placed under administration. The seller demanded that the administrator deliver up possession of the goods on the ground that the contract of sales contained a retention of title clause, whereby title to the goods did not pass to the purchaser until the purchase price had been paid in full. The administrator denied the existence of such a clause and refused to return the goods. The Court held that the fact that the company was insolvent or was likely to become so and the placement of the company under administration resulted in such a detriment to the seller so as to substantially deprive it of what it was entitled to expect under the contract. The denial by the administrator of a retention of title term in the contract also amounted to fundamental breach within the meaning of article 25." Koch, Pace Review of the Convention on Contracts for the International Sale of Goods (1998) 246-247.

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Classification of issues present

APPLICATION OF CISG: Yes [Article 1(1)(a)]

APPLICABLE CISG PROVISIONS AND ISSUES

Key CISG provisions at issue: Articles 4 ; 8 ; 25 ; 26 ; 63 ; 64 [Also cited: Articles 11 ; 15(1) ; 18(1) ; 29(1) ; 53 ; 61 ; 74 ; 75 ; 76 ; 81 ; 84 ] [Also relevant: Articles 23 ; 30 ]

Classification of issues using UNCITRAL classification code numbers:

4B ; 4B2 [Issues covered and excluded (issues excluded): agency; tort of conversion for interference with possessory rights of seller; Effect of contract on property: retention of title clause, validity of];

8A ; 8B2 ; 8C [Interpretation of party's statements or other conduct: intent of party making statement or engaging in conduct; Interpretation based on objective standards: understanding of reasonable person of same kind as other party in the same circumstances as the other party; Interpretation in light of surrounding circumstances];

25B [Definition of fundamental breach];

26A [Notification of avoidance: effective declaration of avoidance];

63A [Notice fixing additional final period for buyer's performance];

64A [Seller's right to avoid contract: grounds for avoidance]

Descriptors: Scope of Convention ; Agency issues ; Conditional sales ; Insolvency ; Retention of title clause ; Torts ; Intent ; Avoidance ; Fundamental breach ; Nachfrist

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Editorial remarks

EDITOR: Albert H. Kritzer

A German company sold goods to an Australian hire firm specializing in major events such as the Australian Grand Prix and other large festivals. The goods consisted of tent hall structures: aluminum tent profiles and covers for large tents, extra gable infills and other accessories. Buyer agreed to pay for the goods according to a set schedule. Buyer fell behind in its payments and, having encountered other financial difficulties, "was placed in administration". This was followed by a "Deed of Company Arrangement" with buyer's creditors. Seller brought suit against buyer and the administrator(s) of the arrangements.

Concluding that the CISG applied as the parties were from different Contracting States (Article 1(1)(a)), the issues addressed by the court were: Did the contract contain a retention of title clause? If so, was this clause valid? What are the appropriate remedies?

The court applied the CISG as follows:

Intent. Citing Articles 8(1) and (2), 11, 15(1), and 18(1) and 29(1) and focusing primarily on Article 8(1) and (2), the court sifted the evidence and concluded that the parties intended to and did enter into a retention of title agreement. The court stated that "it was [buyer's] intention to convey [to seller] the appearance that it had agreed to the [retention of title] condition required by [seller]. The understanding of a reasonable person in the position of [seller] on reading [buyer's] communication would be that the condition demanded by it had been fulfilled: see Convention, Art 8(1) and (2)." The court also pointed out that in their dealings with one another, neither buyer nor seller took steps that would indicate a contrary understanding. Article 8(3) is relevant to this observation.

Scope of the CISG. The court ruled: "The Convention not being concerned with property rights" (Article 4), it must evaluate the retention of title clause pursuant to the appropriate domestic law, which it did, holding it valid. Another issue the facts presented, also outside the scope of the CISG, had to do with a principal and agent relationship. Present as well in the case and ruled upon by the court under domestic law was a claim against buyer and the administrator based on "the tort of conversion for interfering with the possessory rights of [seller]."

Fundamental breach/Notice fixing additional period of time for performance/Avoidance. Citing Articles 53 ("The buyer must pay the price for the goods . . .") and 61 ("If the buyer fails to perform any of his obligations", the seller is entitled to the remedies therein specified) and focusing on Articles 25 (definition of fundamental breach), 63 (the fixing of an additional period of time for performance by the buyer), and 64 (seller's right to avoid the contract), the court stated:

"Immediately prior to 6 October 1993 [buyer] was in continuing breach of the contract of sale in that interest payments were overdue. . . . No demand had been made for these payments, and a letter from [seller] to [buyer] dated 27 September 1993 made no reference to these overdue payments. Further, [buyer] had not at 6 October 1993 assigned income expected to be received from the November 1993 Grand Prix to [seller], but that was something that could be done effectively after 6 October 1993. I am not satisfied that these breaches of contract, in the absence of notice to perform under Art 63, constituted fundamental breaches that would justify avoidance of the contract of sale immediately prior to 6 October 1993. In any event no declaration of avoidance had been notified to [buyer] before 6 October 1993 [the date on which buyer, having encountered other financial difficulties, "was placed in administration"]. The contract of sale remained on foot when the administrator was appointed. . . .

"Whilst the provisions of [the Law (the Australian law governing the type of administration that was established on 6 October 1993)] control the circumstances in which the property of the company may be recovered or taken by other parties, they do not freeze or suspend the exercise of every right held by a creditor. The provisions operate only according to their terms, and rights which are not modified or suspended may be exercised as if the administration had not occurred. Whilst [the Law] curtailed [seller's] right to recover the goods from [buyer] during the administration . . . none of the provisions of the Law prevented [seller] from notifying a declaration of avoidance of the contract. . . . [T]he appointment of an administrator by [buyer] consituted a fundamental breach of the contract within the meaning of Art 25 which would justify [seller] notifying a declaration of avoidance. The resolution of the directors making that appointment amounted to an acknowledgement by them that the company was insolvent or was likely to become so. That fact, and the placement of the company under administration, in the circumstances of this case, resulted in such detriment to [seller] as substantially to deprive it of what it was entitled to expect under the contract. The denial by [the administrator] as agent for [buyer] (see [provisions of the Law to this effect]) of the term as to retention of title also amounted to a fundamental breach of the contract."

Notice of avoidance. Having quoted Article 26 ("A declaration of avoidance of the contract is effective only if made by notice to the other party"), the court stated: "The pleadings give no indication of the act which is said to constitute the 'acceptance of the . . . repudiation'. Whatever that act was, assuming there was one, it would probably constitute notification of a declaration of avoidance. I do not think the correspondence between [seller] and [buyer], and their solicitors, in October and early November 1993 can be construed as a declaration of avoidance. The correspondence concerns [buyer's] claim to possession of the goods ---- a claim which could have been made pursuant to the contract and not only as a consequence of avoidance [citing Australian case law to this effect]. . . . [T]he evidence led by the parties hardly touches on the administration, and does not deal at all with events after 9 November 1993. If there were no earlier notification of a declaration of avoidance I consider the filing of the statement of claim should be so construed as it makes it plain that [seller] at that time treated the contract as at an end. The statement of claim was filed on 12 December 1993. . . ."

Damages/Restitution. The court stated: "[Seller] is entitled to enforce the rights and obligations which arose on the avoidance of the contract under the Convention. So too is [buyer]. Relevantly the Convention provides, first as to damages [quoting Articles 74, 75, and 76]. And secondly as to restitution [quoting Articles 81 and 84]."

Stating that "[t]here is no evidence before the Court which enables the application of these provisions [at this time]" and indicating that there will be a communication with the parties "to arrange a convenient time to relist the matter", the court observed:

"[I]mmediately upon his appointment [the] administrator . . . obtained an 'auction realisation' valuation of the plant and equipment of [buyer] . . . that may be of some assistance to the parties in the application of Art 76 should that be appropriate.

"[Seller] complains that its loss and damages are ongoing, and will continue until the goods are returned. As [seller] cannot resell the goods for the purpose of Art. 75, nor make restitution as required by Art 81, until the goods are returned, the appropriate date at which to assess the net result of applying the above Articles could be the date of return of the goods. In the unlikely event that the net result were in favour of [buyer], there would be no practical point in [seller] pursuing a claim against [the administrator].

"On the other hand if the net result is in favour of [seller], [seller] will obviously wish to obtain judgement against [buyer] and [the administrator] in respect of their respective liabilities -- unless the fortunes of [buyer] have now so improved that [seller] is content to await payment by the company of its entitlement assessed under the Convention."

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Editorial remarks

EDITOR: Lisa Spagnolo

Excerpt from analysis of Australian case law on the CISG. Reproduced with permission of 10 Melbourne Journal of International Law (2009) 171-174

Roder Zelt- und Hallenkonstruktionen GmbH v Rosedown Park Pty Ltd [155]

By Australian standards, Roder Zelt was a relatively enlightened decision by von Doussa J in the Federal Court. It involved a retention of title clause in a contract for large tent marquees and accessories. The parties were a German seller and Australian buyer, to which an administrator was appointed after delivery. The parties agreed that the CISG was the governing law of the contract.[156] Despite this, '[c]ounsel made only passing reference to the [CISG] at trial', and the pleadings were all couched in 'the language and concepts of the common law, not in those of the [CISG]'.[157]

The Court correctly pointed out that interpretation of the CISG was not a matter for expert evidence, since it was part of domestic law and 'not to be treated as a foreign law which requires proof as a fact'.[158]

As the main issue was property in the goods, von Doussa J rightly referred to art 4(b) which excludes the CISG from concern with regard to 'the effect the contract may have on property in the goods sold'.[159] The parties accepted that the issue was therefore governed by the law applicable upon application of German conflict of law rules, since Germany was identified as the place in which the contract was concluded. Yet, as the analysis of von Doussa J demonstrates, identification of Germany as the place the contract was made was itself only determinable by reference to arts 18 and 24 of the CISG on the effect and timing of acceptance of an offer.[160]

German rules of private international law resulted in the applicability of Australian property law on the question of ownership once the goods were in Australia. But was there an agreed retention of title clause? This question was still a matter for the CISG and von Doussa J made extensive reference to the provision on contractual interpretation in art 8, to art 11 on formalities, arts 15 and 18 on effectiveness of offers and acceptance, and art 29 on modification.[161]

After finding that a retention of title clause formed part of the contract, von Doussa J turned to the fundamental breach and remedy provisions of the CISG.[162] His Honour held fast to CISG terminology and concepts, and found that both the appointment of an administrator to the buyer, and denial of the retention of title clause amounted to fundamental breaches because they 'substantially ... deprive[d] [the seller] of what it was entitled to expect under the contract'.[163] Under the CISG, a buyer's fundamental breach allows an innocent seller to avoid the contract pursuant to art 64, but declaration of avoidance is required by art 26 before it becomes effective.[164] Thus von Doussa J correctly concluded that the [page 171] contract was still on foot when the administrator was appointed, as 'no declaration of avoidance had been notified to Rosedown' at that stage.[165] Attention was then turned to insolvency provisions in Part 5.3A of the Corporations Law,[166] which the Court concluded did not prevent 'Roder from notifying a declaration of avoidance'.[167]

Perhaps the common law-centric state of the pleadings[168] prompted a momentary slip in which his Honour enquired what might have 'constitute[d] the "acceptance of the ... repudiation"'.[169] This is a common law concept with no place in the CISG. His Honour quickly returned to appropriate CISG terminology by equating this with notification of declaration of avoidance,[170] although the two are not related. His Honour eventually concluded that the declaration occurred in the form of the statement of claim.[171]

Article 72(1) on anticipatory breach enables avoidance of the contract where it is clear that a party will commit a fundamental breach. As Ziegel observes, this might have provided a more appropriate basis for the Court's decision,[172] but was not considered. Ziegel also argues that the Court misconstrued art 63(1), which allows the seller to set an additional time for performance.[173] In this way, the seller can convert an uncertain fundamental breach into a definitive right of avoidance.[174] It is submitted the Court did not fall into error on this point. The reference to art 63 was by way of clarification, not as a prerequisite to avoidance. Perhaps a little awkwardly, the Court was effectively saying the failure to pay interest was not a fundamental breach per se, nor did a right of avoidance arise by notice pursuant to art 63.[175]

Ultimately, it held the seller was entitled to enforce the Romalpa clause pursuant to domestic law, and was entitled to damages pursuant to arts 74-6. It also indicated that the buyer was entitled to restitution of payments made under art 81.[176] However, examination of those provisions was cut short because there was insufficient evidence before the Court.[177] The matter was set down for re-listing, but presumably settled.

Additionally, von Doussa J determined that damages for conversion, and interest would be available. Unfortunately, like the other Australian cases that [page 172] followed,[178] the comments were made without regard for the interrelation of domestic tort actions with the operation of the CISG.[179]

The judgment shows a reasonable level of cognisance of the CISG provisions and their effect. It has been criticised as providing 'little future guidance'.[180] Yet the Court did successfully navigate the interface between the CISG and the law applicable to property in the goods.[181] In Roder Zelt, the CISG was correctly applied to arrive at the construction and meaning of the retention of title clause,[182] and then, since property in goods is an issue external to the CISG, it fell to the law applicable on that issue to determine the effect of the clause. Similar interactions between the CISG and other laws on external issues have not been as well handled in subsequent Australian cases.

As Roder Zelt did not refer to any CISG cases from other jurisdictions or CISG scholarship,[183] it can hardly be described as internationalist. These would have alerted the Court to the above issues. It must be remembered, however, that the judgment was rendered in 1995, before the advent of websites that now abound with sources of guidance.[184]

Roder Zelt still stands out amongst Australian cases in which the CISG actually applied, because it treated the CISG autonomously. It displayed a willingness to engage in the challenge of interpreting the CISG free of domestic preconceptions, an admirable effort given the pleadings. The case attracted copious international attention,[185] and is still cited in CISG cases in other [page 173] jurisdictions.[186] There have been other CISG cases dealing with retention of title clauses since Roder Zelt. These would be relevant to any future Australian court's interpretation of the CISG on this aspect.[187]
_________________________

155. (1995) 57 FCR 216.

156. Ibid 220.

157. Ibid.

158. Ibid 222.

159. Ibid.

160. Ibid 222-3.

161. Ibid 224, 230.

162. Reference was made to arts 25, 26, 53, 61, 63 and 64 of the CISG: ibid 233-4.

163. Ibid 234 (using the language of art 25 of the CISG).

164. On arts 25 and 26 of the CISG, see above nn 71, 74.

165. Roder Zelt (1995) 57 FCR 216, 234.

166. Corporations Law (Cth) pt 5.3A; amended by Corporations Act 2001 (Cth) pt 5.3A.

167. Roder Zelt (1995) 57 FCR 216, 234.

168. Ibid 219-20.

169. Ibid 235.

170. Ibid

171. Ibid.

172. Jacob S Ziegel, 'Comment on Roder Zelt- und Hallenkonstruktionen GmbH v Rosedown Park Pty Ltd' in Pace International Law Review (ed), Review of the Convention on Contracts for the International Sale of Goods (CISG) 1998 (1999) 53, 61. But see Peter Schlechtriem, 'Sale of Goods: General Provisions: Art 25' in Peter Schlechtriem and Ingeborg Schwenzer (eds), Commentary on the UN Convention on the International Sale of Goods (CISG) (2nd ed, 2005) 281, 298 (insolvency normally constitutes fundamental breach).

173. Ziegel, 'Comment on Roder Zelt', above n 172, 60.

174. See CISG, above n 1, arts 64(1), 63(1). On 'upgrading' (in this case, non-payment of price) to fundamental breach, see above n 71.

175. Roder Zelt (1995) 57 FCR 216, 234.

176. Ibid 239.

177. Ibid.

178. Including Perry and Ginza Pte Ltd v Vista Corp Pty Ltd, discussed below nn 192 and 268 respectively, and accompanying text.

179. The CISG may pre-empt certain tortious and other actions: see generally Schlechtriem, 'The Borderland of Tort and Contract', above n 133; Joseph Lookofsky, 'In Dubio Pro Conventione? Some Thoughts about Opt-Outs, Computer Programs and Preemption under the 1980 Vienna Sales Convention (CISG)' (2003) 13(3) Duke Journal of Comparative and International Law 263; Spagnolo, 'Opening Pandora's Box', above n 54, 302.

180. Jacobs, Cutbush-Sabine and Bambagiotti, above n 4, [7.9].

181. See, in support, Fairlie, above n 2, 51-2. Contra, Ziegel, 'Comment on Roder Zelt', above n 172, 56-9 (arguing that CISG remedies should not apply to security aspects of instalment sales contracts). Fairlie notes that Ziegel's point is relevant in those jurisdictions where the effects of such clauses fall within personal property securities legislation.

182. See also Schmidt-Kessel, above n 59, 114.

183. Zeller, 'A Leap Forward', above n 154, 90, and accompanying text.

184. See above n 130.

185. Schlechtriem 'Arts 1-6', above n 52, 70; Schmidt-Kessel, above n 59, 114, 125; Schlechtriem, 'Art 25', above n 172, 298; Hornung, above n 74, 303; Gnter Hager, 'Sale of Goods Obligations of the Buyer: Remedies for Breach of Contract by the Buyer: Arts 61-65' in Peter Schlechtriem and Ingeborg Schwenzer (eds), Commentary on the UN Convention on the International Sale of Goods (CISG) (2nd ed, 2005) 652, 663; Peter Schlechtriem, 'Requirements of Application and Sphere of Applicability of the CISG' (2005) Victoria University Wellington Law Review 781, 789; Di Matteo et al, above n 140, (fn 840); Ferrari, 'Applicability and Applications', above n 20, 226 (fn 787); Honnold, Uniform Law for International Sales, above n 71, 212, 390, 508; Koch, above n 72, 246-7; Ziegel, 'Comment on Roder Zelt', above n 172; Jacobs, Cutbush-Sabine and Bambagiotti, above n 4, [7.9]; Fairlie, above n 2, 51-2; Bruno Zeller, 'Is the Sale of Goods (Vienna Convention) Act the Perfect Tool to Manage Cross Border Legal Risks Faced by Australian Firms?' (1999) 6(3) E Law - Murdoch University Electronic Journal of Law [77] <http://www.murdoch.edu.au/elaw/issues/v6n3/zeller63.html>; Herbert Bernstein and Joseph Lookofsky, Understanding the CISG in Europe (2nd ed, 2002) 26-7 (fn 82); see also Bridge, 'A Commentary on Articles 1-13 and 78', above n 59, 235 (fn 30); Franco Ferrari, 'Interpretation of Statements: Article 8' in Franco Ferrari, Harry M Flechtner and Ronald A Brand (eds), The Draft UNCITRAL Digest and Beyond: Cases, Analysis and Unresolved Issues in the UN Sales Convention (2004) 172, 179 (fn 47).

186. See, eg, Milk Packaging Equipment Case (Foreign Trade Court of Arbitration, Serbian Chamber of Commerce, Serbia, 15 July 2008) <http://cisgw3.law.pace.edu/cases/080715sb.html>; Usinor Industeel v Leeco Steel Prods Inc (US District Court (ND Ill), US, 28 March 2002) <http://cisgw3.law.pace.edu/cases/020328u1.html>.

187. See Usinor Industeel v Leeco Steel Prods Inc (US District Court (ND Ill), US, 28 March 2002) <http://cisgw3.law.pace.edu/cases/020328u1.html>. See also Motor Yacht Case (Oberlandesgericht Koblenz, Germany, 16 January 1992) <http://cisgw3.law.pace.edu/cases/920116g1.html>; St Paul Guardian Insurance Co v Neuromed Medical Systems and Support GmbH (US District Court (SD NY), US, 26 March 2002) <http://cisgw3.law.pace.edu/cases/020326u1.html>. See also, CISG Advisory Council, Opinion No 9, above n 52, Commentary [3.6] (confirming that the effect of retention of title clauses is not covered by the CISG).

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Citations to other abstracts, cases texts and commentaries

CITATIONS TO OTHER ABSTRACTS OF DECISION

English: See above; see also Unilex database <http://www.unilex.info/case.cfm?pid=1&do=case&id=197&step=Abstract>

Italian: [1998] Diritto del Commercio Internazionale 1086-1087 No. 189

CITATIONS TO TEXT OF DECISION

Original language (English): Text presented below; see also CISG online website ("http://www.jura.uni-freiburg.de/ipr1/cisg/urteile/text/218.htm"); (1995) 57 Federal Court Reports (Australia) 216-240; Unilex database <http://www.unilex.info/case.cfm?pid=1&do=case&id=197&step=FullText>

Translation: Unavailable

CITATIONS TO COMMENTS ON DECISION

English: Ferrari, International Legal Forum (4/1998) 138-255 [226 n.787 (scope of CISG: passing of property in goods sold)]; Honnold, Uniform Law for International Sales (1999) 212 [Art. 25 (standards for avoidance)], 390 [Art. 64], 508 [Art. 81]; Koch, Pace Review of Convention on Contracts for International Sale of Goods (1998) 246-247 [fundamental breach: inability of performance]; Ziegel, Comment on Roder Zelt- und Hallenkonstruktionen GmbH v. Rosedown Park Pty Ltd (November 1998) [comment presented below, following text of case]; Jacobs et al., 17 Mealey's International Arbitration Reports (August 2002) 24; Walt, 35 Uniform Commercial Code Law Journal (2002) 57-61 [commenting on property issues]; Berstein & Lookofsky, Understanding the CISG in Europe, 2d ed., Kluwer (2003) §: 2-6 n.82; [2005] Schlechtriem & Schwenzer ed., Commentary on UN Convention on International Sale of Goods, 2d (English) ed., Oxford University Press, Art. 4 para. 18 Art. 8 paras. 5, 31 Art. 25 para. 22 Art. 26 para. 10 Art. 64 para. 5; Fairlie, Commentary at September 2005 seminar on the CISG in Singapore at pp. 50-51; Spaic, Analysis of Fundamental Breach under the CISG (December 2006) nn.318-319

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Case text

Federal Court of Australia, South Australian District, Adelaide

Roder Zelt- und Hallenkonstruktionen GmbH
v.
Rosedown Park Pty Ltd and Reginald R Eustace

Van Doussa, Judge

1. In June and July 1992 the applicant ("Roder") agreed to sell goods to the first respondent ("Rosedown") to the value of Deutschmark 609,102.00 with payment to be made by a deposit and installments after delivery. The goods were received by Rosedown in October 1992. Roder alleges that the contract contained a term for the retention of title in the goods by Roder until the purchase price had been paid in full. Rosedown fell into arrears with its payments before the end of 1992, and the payment schedule was rearranged. On 6 October 1993 the second respondent, Mr Eustace, was appointed the administrator of Rosedown under s.436A of the Corporations Law ("the Law"). Thereupon the company came under administration under Part 5.3A of the Law (ss.435-458): see s.435C(4). Roder immediately advised Mr Eustace that ownership of the goods remained with Roder, and Roder claimed possession. Mr Eustace disputed the existence of a retention of title term in the contract, denied both Roder's claimed interest in the goods and its right to possession, and asserted that Roder was merely an unsecured creditor for the outstanding balance of the purchase price.

2. On 8 November 1993 Roder commenced the present action against Rosedown and Mr Eustace claiming a declaration that the property in the goods remained with Roder, an order for delivering up of the goods to Roder, an order pursuant to s.440C of the Law granting leave to Roder to take possession of the goods, and various consequential orders including damages. On 9 November 1993 by specially returnable notice of motion Roder sought interlocutory injunctions restraining the respondents from removing certain of the goods from South Australia, and from selling, charging, or otherwise dealing with the goods, and for immediate delivery of the goods into the possession of Roder. The orders were opposed by the respondents. A meeting of creditors convened under s.439A of the Law was to be held on the following day to consider a resolution directing Rosedown to enter into a Deed of Company Arrangement pursuant to Part 5.3A providing for a moratorium on payment of pre-6 October 1993 debts to all creditors until March 1994 on conditions as to minimum future trading performance specified in the Deed. Mr Eustace in an affidavit sworn on 9 November 1993 deposed that: "If I am unable to use the equipment which the Applicant now claims in and about my administration of the First Respondent's business then the Deed of Company Arrangement will immediately fail and cease to operate which will be to the detriment of the creditors of the First Respondent."

3. On the hearing of the notice of motion, upon an undertaking being given by Mr Eustace to secure and maintain the goods in good working order but subject to fair wear and tear and to continue current insurance, all claims for relief were stood over pending a trial; an order was made pursuant to s.440D(1)(b) of the Law giving leave to Roder to proceed with this action notwithstanding Mr Eustace's administration of Rosedown; and directions were given to prepare the matter for trial, including directions as to pleadings and the filing of affidavit evidence.

4. The statement of claim was filed on 13 December 1993. Thereafter numerous delays occurred, times limited for procedural steps were not met, and time was lost whilst applications of security for costs and for the transfer of the proceedings to another registry were dealt with. In the meantime it seems (from statements made from the bar table during the trial) that the creditors passed a resolution under s.439C(c) requiring Rosedown to enter into the proposed Deed of Company Arrangement, and that the moratorium period was at some later stage extended from 31 March 1994 to 31 March 1995. Upon the execution of the Deed the administration of Rosedown came to an end: s.435C(2). The rights and duties of the creditors thereafter were governed by Div.10 of Part 3.5A (ss.444A to 445) and by the terms of the Deed.

5. In the preparation and presentation of their cases the parties have given little attention to the provisions of Part 5.3A, and the evidence is silent about events that have occurred in the administration after 9 November 1993, and under the Deed of Company Arrangement. It will be necessary to return to the provisions of Part 5.3A in detail later in these reasons. At this point, however, it should be noted that whilst the meeting of creditors convened under s.439A could have resolved that the administrator of the Deed be someone other than the administrator of the company: see s.444A(2), it appears from the conduct of these proceedings that this did not happen. It is implicit in affidavits read at trial that Mr Eustace is the administrator of the Deed.

6. In the statement of claim it was alleged that Rosedown in breach of contract failed to assign certain moneys to Roder, failed to pay interest due on the installments and failed to pay DM 266,000 and interest of DM 9,975 due on 30 November 1993 (the latter payments falling due after the commencement of the administration and these proceedings) (para.9); that in the circumstances Rosedown had repudiated the contract and Roder had accepted the repudiation thereby determining the contract (para.10); that in the premises Roder was entitled to immediate possession of the goods (para.11); and that in October 1993 Roder requested Rosedown to deliver up the goods and further requested Mr Eustace's consent to it retaking possession which requests were refused (para.12). It was pleaded that in consequence of the breaches of contract by Rosedown, and in consequence of the respondents' refusal to give up possession of the goods, Roder suffered loss and damage. Particulars of the loss and damage were not pleaded but it was said that particulars would be given prior to trial (paras.13 and 14). The relief sought was that claimed in the application.

7. The claim for "damages" was made without further indication of the nature or legal basis for that claim or against which of the respondents it was made.

8. Defences were filed by Rosedown on 11 April 1994 and by Mr Eustace on 1 July 1994. These were amended at trial when a counter claim was also pleaded by both respondents. It was pleaded in the statement of claim and admitted by the respondents that Mr Eustace was on 6 October 1993 appointed as administrator of Rosedown. This is the only reference in the pleadings to his standing in the proceedings. He could not be a party to the counter claim in that capacity as the administration had ended before the counter claim was filed. Presumably he is a party as administrator of the Deed of Company Arrangement.

9. By the defences the allegations relating to the terms for retention of title, for payment, and for interest were either denied or not admitted.

10. Further it was pleaded that if there were a term as to retention of title then

(i) at the time when the term became part of the contract, property in the goods had already passed to Rosedown;
(ia) prior to then, no such term had been agreed, or alternatively the term was too vague or unclear to be of any contractual effect;
(ii) in any event, the engrafting of such a retention of title term into the contract constituted the creation by Rosedown of a charge over its property, since property had already passed to Rosedown;
(iii) such charge was never registered in compliance with s.263(1) of the Law or s.201(1) of the Companies (Victoria) Code; and
(iv) such charge is void against Mr Eustace under s.266(1) of the Law. Repudiation of the contract by Rosedown was denied, as was Roder's entitlement to possession. The allegations of loss and damage were denied. Reliance on s.440B of the Law was pleaded. That section provides that a charge is not enforceable on property of a company during the administration of a company except with the consent of the administrator or with the leave of the Court.

11. Finally it was pleaded that if it is held that the applicant is entitled to the return of the contract goods then the respondents or either of them are entitled to the return of the moneys paid to Roder in respect of the goods (pleaded to be a deposit of DM 66,500, and an installment of DM 72,318.75, although the evidence, such as it is, suggests the installment was DM 66,500: see Ex.A1 p.42) upon a consideration that has totally failed, and that such moneys should be set off against the damages claimed. The counter claim was for the return of these moneys in the event that it is held that Roder is entitled to the return of the goods.

12. As will appear later in these reasons, the contract for the sale of the goods is one to which the United Nations Convention on Contracts for the International Sale of Goods ("the Convention") applies. The provisions of the Convention govern the rights and obligations of the parties arising from the contract. The pleadings, and the claims for relief in the statement of claim and in the counter claim, are expressed in the language and concepts of the common law, not in those of the Convention. Counsel made only passing reference to the Convention at trial. Upon consideration of the case I have concluded that the issues to be addressed, in the event that it is held that the contract of sale included a valid and effective retention of title term, are somewhat different to those stated in the pleadings. I shall return to this topic after resolving the disputed questions of fact.

13. The affidavits filed by the parties before trial concentrated solely on the events and documents that evidenced or recorded the transaction for the sale of the goods, and to aspects of German law. No attention was given in the affidavits to the claim for loss and damage alleged by Roder, or to the effect of Part 3.5A of the Law on the rights and obligations of the parties in the event that Roder established the alleged retention of title term. The affidavits dealt with the issue of liability and not the issue of damages or other consequential relief. The Court was informed that Roder had assumed that the trial was to resolve the liability issue, and that damages and consequential orders would be considered at a later date - hence no attempt had been made to give particulars of loss and damage prior to trial. The Court was informed that very shortly before trial counsel for the respondents informed Roder that the respondents wished to have all aspects of the case, including that of damages, resolved at the one trial. In his opening counsel for Roder argued that consideration of damages and other relief should be stood over for further enquiry after liability had been resolved because the assessment of Roder's loss would, in part, involve a determination of the value of the goods on their eventual return. It was said that the claim for damages included a claim for damages against Mr Eustace personally in tort for the wrongful failure to give up possession of the goods when requested in October 1993. Counsel was not precise whether the claim against Mr Eustace was one in detinue (cf Strand Electric and Engineering Co. Ltd v Brisford Entertainments Ltd (1952) 1 All ER 796) or in conversion (cf Clough Mill Ltd v Martin (1984) 3 All ER 982) but gave most emphasis to a claim in conversion. The assessment of damages in either case, counsel submitted, would, in practical terms, involve assessing the difference in the value of the goods at October 1993 and when they are returned, and also a consideration of "rental value" as Rosedown, under Mr Eustace's administration, has continued to use the goods in its business. As discussion developed between counsel and the Court it became plain that neither side had worked through the implications of the provisions of Part 5.3A of the Law, and they (especially counsel for Roder) were not able at that time to present other than the case on liability.

14. In these circumstances I propose to decide the disputed questions of fact raised by the pleadings, to discuss a number of the provisions of the Convention and Part 5.3A of the Law, and then to stand the matter over for further consideration. Was there a retention of title term in the contract?

15. It is common ground that the applicant, a German company, at all material times carried on business in Germany at Budingen. It is one of the major manufacturers and suppliers in the world of large tent halls and party marquees. Rosedown is a company incorporated in Victoria. It is the trustee of the G S Tucker Family Trust which traded as Geoff Tuckers Hire and Catering from premises in Dandenong, Victoria. The business has been in operation for many years, and is one of the largest hire companies in Australia specialising in major events such as the Australian Grand Prix and the Moomba and other large festivals. The goods, the subject of these proceedings, included aluminium tent profiles and covers for five very large tents, extra gable infills and other accessories. It is admitted in the pleadings that Rosedown agreed to buy the goods from Roder. There was no dispute at trial that the purchase price was to be paid as follows:
. on placing the order - DM 66,500 . 30 November 1992 - DM 133,000 . 30 March 1993 - DM 66,500 and interest DM
1,496.25 . 30 November 1993 - DM 133,000 and interest DM 9,975 . 30 March 1994 - DM 66,500 and interest DM
7,481.25 . 30 November 1994 - DM 143,602 and interest DM 23,694.22.

16. Further there was no dispute that the goods were ultimately supplied "ex works" from Budingen on 27 and 28 August 1992 whence they were freighted overland to Rotterdam where they were loaded on board ship on 3 September 1992. They were delivered to Rosedown in Australia on about 3 October 1992. The tentage was urgently required in Australia to fulfil contractual commitments of Rosedown at the Adelaide Grand Prix in November 1992.

17. It was also common ground that the deposit of DM 66,500 was paid by Rosedown to Roder on 20 August 1992. Rosedown was unable to pay the next installment of DM 133,000 due on 30 November 1992. Rosedown had hoped to do so from rental received from the Grand Prix, but money earmarked for that purpose had apparently been used to pay freight and import duty on the goods. That installment was deferred to 30 November 1993 with the intent that following the 1993 Grand Prix Rosedown would pay two installments totalling DM 266,000. As already noted, an administrator of the company was appointed prior to that date.

18. On the contentious issue concerning retention of title the applicant read affidavits from Mr Jamie Watts, the Australian agent of Roder; from Ms Erna Charlotte Mayer, an interpreter who translated invoices and shipping documents from the German language to the English language; from Michael John Fielding who at material times was the business manager of Rosedown responsible for its day to day management and administration under the supervision of the managing director, Geoffrey Stewart Tucker ("Mr Tucker"); and from Dr Thomas Hoene, a German lawyer specialising in commercial and corporate law in Germany. The respondents read affidavits from Mr Tucker; from Mr Eustace, and from Mr Nicholas Giasoumi, a chartered accountant in the employ of Mr Eustace.

19. The parties were agreed that the contract for the sale of the goods was one to which the Convention applied. That Convention has become part of the law of Australia, and, relevantly for the purposes of this case, part of the law of Victoria by virtue of the Sale of Goods (Vienna Convention) Act 1987 (Vic.). The Convention applies to contracts for the sale of goods between parties whose places of business are in different contracting States (Art.1). Both Germany and Australia are contracting States. Dr Hoene's affidavit expresses his opinion upon the application of the Convention to the facts of this case as disclosed to him in correspondence and affidavit material most of which was introduced into evidence at trial. However insofar as the contract is governed by the Convention, which is now part of the municiple law of Australia, the meaning of that law, and its application to the facts, is to be determined by this Court. It is not a matter for expert evidence. The Convention is not to be treated as a foreign law which requires proof as a fact.

20. However the Convention governs only the formation of the contract of sale and the rights and obligations of the seller and buyer arising from such a contract; in particular, the Convention is not concerned with the effect which the contract may have on the property in the goods sold: Art.4. Article 7 (2) provides that: "Questions concerning matters governed by this Convention which are not expressly settled in it are to be settled in conformity with the general principles on which it is based or, in the absence of such principles, in conformity with the law applicable by virtue of the rules of private international law."

21. Under Article 18 an acceptance of an offer becomes effective at the moment the indication of the assent reaches the offerer, and under Article 24 a declaration of acceptance or other indication of intention "reaches" the addressee when it is made orally to him or delivered by any other means to him personally, to his place of business or mailing address. Relevantly in the present case the offerer was Roder, and it is common ground between the parties that the acceptance occurred in Germany, and that the contract of sale was made in Germany. The parties accepted that it was relevant therefore to receive evidence of German law insofar as it dealt with the effect which the contract may have on the property in the goods sold.

22. According to the opinion of Dr Hoene the property law effect of a retention of title agreement is determined, as are all property related transactions and relationships, according to German private international law by the lex rei sitae, i.e. the law of the place in which the relevant property is situated. Dr Hoene continues: "The property law effect of agreements of the parties is, therefore, determined by German law for as long as the items sold are in Germany. According to German private international law the property law effect is to be assessed under Australian law when the goods are in Australia. It is unclear which law applies to agreements which are entered into during the transportation of goods. The overriding view in the literature is that the law of the destination applies (in this case Australia)...(numerous references to authority are cited). If an item is brought to another country following agreement on retention of title the validity of the retention of title agreement is determined initially by the law of the country in which the item purchased was located at the time the retention of title agreement was entered into. If under German law a retention of title agreement had been entered into when the item arrives in the other country the law of the other countries (sic) determines the continuing existence of retention of title agreement and the content and performance of this agreement... Under German law, the property law effect of the retention of title is that the transfer of title...takes effect on condition precedent that the purchase price be paid in full. This means that the title only passes to the buyer when the purchase price has been paid in full to the seller..."

23. Under German law, title to the goods would not pass under a retention of title clause to the purchaser until payment. However once the goods arrived in Australia the property law effect of the agreements reached between the parties is to be determined by Australian law.

24. Under Australian law, the validity of retention of title clauses - aside questions of ambiguity and uncertainty - is recognised, and, generally speaking, they operate so that title does not pass until the payment requirement of the condition relating to retention of title is fulfilled: Aluminium Industrie Vaassen BV v Romalpa Aluminium Limited (1976) 1 WLR 676, Armour and Another v Thyssen Edelstahlwerke AG (1991) 2 AC 339, and The Goods Act 1958 (Vic.) s.24, but see Prof. Di Everett, Romalpa Clauses: The Fundamental Flaw (1994) 68 ALJ 404. 25. Whether a term as to retention of title was agreed between Roder and Rosedown, and the content of that term are questions of fact, but ones to be determined having regard to certain further provisions of the Convention, and in particular:

"Article 8 (1) For the purposes of this Convention statements made by and other conduct of a party are to be interpreted according to his intent where the other party knew or could not have been unaware what that intent was.
(2) If the preceding paragraph is not applicable, statements made by and other conduct of a party are to be interpreted according to the understanding that a reasonable person of the same kind as the other party would have had in the same circumstances.
(3) ...

Article 11 A contract of sale need not be concluded in or evidenced by writing and is not subject to any other requirement as to form. It may be proved by any means, including witnesses.

Article 15 (1) An offer becomes effective when it reaches the offeree.
(2) ...

Article 18 (1) A statement made by or other conduct of the offeree indicating assent to an offer is an acceptance. Silence or inactivity does not in itself amount to acceptance.
(2) ...
(3) ...

Article 29 (1) A contract may be modified or terminated by the mere agreement of the parties.
(2) ..."

26. Both Mr Fielding and Mr Tucker were cross-examined on their affidavits. Mr Fielding's affidavit explains at length the course of negotiations with Roder, and the extensive correspondence that took place over several months leading up to the dispatch of the goods from the Roder works. He says that the negotiations between Roder and Rosedown, which were mainly conducted by him on behalf of Rosedown, took place throughout on the clear understanding that property in the goods would not pass until payment in full had occurred. Rosedown was in dire financial straits and he in collaboration with Mr Tucker, at times made representations to Australian financiers which were inconsistent with a retention of title clause, and in certain of his correspondence with Roder he sought to evade the issue of the retention of title clause. Nevertheless he maintains that it was clearly understood throughout the discussions with Roder that there would be a term as to retention of title and, moreover, Mr Tucker was fully aware of this fact as negotiations progressed. Mr Tucker knew that the goods could not be obtained except on that condition as Rosedown was in no position otherwise to finance the purchase. There was difficulty raising funds even for the deposit. When the deposit was belatedly paid on 20 August 1992 Roder required, by letter dated 20 August 1992, promissory notes that had been sent sometime before for signature for the balance of the purchase price and a "signed declaration for the ownership".

Mr Fielding thereupon prepared a document in the following terms:

"Mr Heinz Roder GMBH

Dear Heinz, This is to certify that the goods you are shipping to me now will remain as your ownership until full payment is made. I will be bringing the stock into my books as each category of Structure is paid for. To help me, could you do a split up of the whole order giving me the price of each size category and fax that back to me next week.

Yours sincerely, Geoff Tucker's Hire and Catering Geoff Tucker"

27. Mr Fielding says that the document was signed by Mr Tucker along with the promissory notes which had been with Rosedown since mid-July 1992. The above document was then faxed to Roder, and a copy together with the promissory notes were posted. It will be necessary to say more about the terms of the documents dated 21 August 1992, and about the terms of a subsequent retention of title clause that was signed in September 1992.

28. Mr Tucker on the other hand, in his evidence, says that he was not informed on any occasion prior to 20 August 1992 that a term for the retention of title by Roder was under discussion. Insofar as correspondence prior to that date made reference to such a term he said that the correspondence had not been brought to his attention. He says a letter written by Rosedown on 10 June 1992, early in the negotiations, which included the sentence "I am also happy for you to treat the stock as rental stock (and therefore you maintain ownership) until I complete my payments" although purportedly under his hand, was not signed by him. He also denied that he had signed the document dated 21 August 1992. The effect of his evidence is that he at no time authorised such a term. (His evidence, and the respondents' case, overlooks the fact that Mr Fielding was acting in the course of his employment and within his apparent authority as business manager when he was dealing with Roder). He says that he became aware of Roder's requirement for retention of title first on 20 August 1992 when he saw the letter from Roder requesting a certificate to that effect but denies that he authorised or gave such a certificate until he signed one in September 1992. In relation to that certificate he disputes signing it on 2 September 1992, the day on which Mr Fielding says it was signed by Mr Tucker and faxed to Roder. Mr Tucker claims that it was signed on about 14 September 1992, the day on which Rosedown posted the original of the document back to Roder - a date well after the goods had left Germany.

29. Mr Tucker concludes his affidavit by saying that he considers Mr Fielding was conducting his own negotiations for his own purposes with Roder and without keeping Mr Tucker informed. Precisely what those purposes might have been is not identified. The inference from his affidavit and his cross-examination is that Mr Fielding had forged Mr Tucker's signatures to the letter of 10 June 1992 and to the document of 21 August 1992. When cross-examined as to his reason for asserting that the signatures to those documents were not his, he observed that they were signed "Geoff Tucker" whereas he signed documents "G S Tucker". When it was pointed out to him that there were several other letters written to Roder whose authenticity he had not questioned in his affidavit that were signed "Geoff Tucker" he then disputed their authenticity and said that he did not think the signatures were his. The nature of the letters and his evidence about them makes it highly improbable that the documents were not signed by him, and it appeared to me that he was making up explanations as he went along which he perceived to be supportive of his case. The high water mark of the improbability of these denials came when he denied that a signature, "Geoff Tucker", was his on a letter to Rosedown's bank manager, and on another to Mr Heinz Roder written after Mr Fielding had ceased his employment with Rosedown.

30. Having seen and heard Mr Fielding and Mr Tucker cross-examined on their affidavits I have no hesitation in rejecting the evidence of Mr Tucker where it conflicts with that of Mr Fielding, and accepting the account of events given by Mr Fielding in his affidavit. As I have already indicated, Mr Fielding acknowledged that at times misrepresentations of a serious nature had been made to Australian financiers and that he participated in the making of those representations. In substance it was represented to financiers that the goods to be supplied by Roder would become the property of Rosedown on delivery so that they could immediately be charged to secure other loans. I have therefore scrutinised with care the evidence of Mr Fielding before accepting it. The frank explanations he gave for his conduct, and the support which his story broadly receives from the written documents persuade me that I should accept his evidence notwithstanding his participation in the making of false representations.

31. Caution has also been necessary as Mr Fielding discloses in his affidavit that in about September 1993 he was engaged by Roder to find an agent to assist Roder in its business matters, in recovering moneys that were still owed to it by another company in Australia, and "to assist in cleaning up the Rosedown matter if any such opportunity arose". What this expression means was not explored in cross-examination, nor was it seriously suggested that Mr Fielding's evidence was coloured by this agreement in respect of which he had received a lump sum payment of $4,000 sometime before his affidavit was prepared.

32. In deference to the submissions of counsel for the respondents that the Court should find that Mr Fielding's evidence should not be accepted it is necessary to consider the evidence in further detail.

33. Mr Fielding by profession is an accountant but in recent years he has worked predominantly in the entertainment industry. From 1988 to 1992 he was employed by a company, Trade Structures Pty Ltd ("Trade Structures"), as business manager. That company had a business similar to that of Rosedown, and was involved in leasing tent structures to the Adelaide Grand Prix prior to 1992. The company fell on hard times and was unable to pay extensive debts due to creditors, including Roder who had supplied Trade Structures with tentage. When Trade Structures ran into difficulties an agreement was reached between that company and Rosedown that structures owned by Trade Structures would be transferred to Rosedown for a monthly fee, and at about the same time, March 1992, Mr Fielding commenced employment with Rosedown.

34. The proposed arrangement with Trade Structures fell through, and it was necessary for Rosedown to obtain tent structures from other sources to fulfil its Grand Prix commitments. It was decided that Mr Tucker would visit the three major tent manufacturers each of whom is in Europe, and Mr Fielding was involved in making arrangements, particularly with Roder, for Mr Tucker's visit. Mr Tucker was overseas from 16 to 27 May 1992. Before Mr Tucker left Mr Fielding said to him words to the effect: "...Given my dealings with Roder at Trade Structures I can probably arrange for Roder to sell you the structures on the basis of payments being made over time whereas I think the others will want their money upfront. Mr Tucker - OK. Mr Fielding - I will speak to Roder before you go and get some prices from him to see what's possible. I can probably get a terms deal but Roder will want to retain ownership until the terms deal was settled given what happened with Trade Structures."

35. Mr Tucker denies that this conversation occurred. I find that it did.

36. Shortly after the conversation Mr Fielding spoke with Mr Heinz Roder by telephone seeking prices, and a series of communications followed by fax between them commencing on about 20 April 1992.

37. When Mr Tucker went overseas he took with him two other employees of Rosedown and a financial adviser to the company. Whilst Mr Tucker was overseas he telephoned Mr Fielding and asked him to telephone Mr Roder and negotiate a deal with him. At this time Roder had given a quote for specified items. Mr Tucker denies that he had this conversation or that there would have been any reason for it as he had a financial adviser with him. However he acknowledged in his cross-examination that he left the negotiations with Roder generally to Mr Fielding and authorised him after his return to Australia to conduct the negotiations with Mr Roder. I find that the conversation occurred as Mr Fielding says, and that in the following conversation Mr Fielding was acting within the scope of his authority. As requested Mr Fielding telephoned Mr Roder and a conversation to the following effect occurred: "Mr Fielding - You know the type of structure that we want and we would like to deal with you. Mr Roder - I don't want the Trade Structures experience to be repeated. If Rosedown fails I have to be protected and I have to get the structures back. Mr Fielding - That's fine Heinz, you can retain ownership of the structures until you have been paid in full. Mr Roder - Good, you give to me the proposed payment terms and we will take it from there."

38. Mr Fielding reported that conversation to Mr Tucker in Europe including that Mr Roder would extend time for payment only if he retained ownership of the structures until paid in full. Mr Tucker said "That's OK".

39. Upon Mr Tucker's return to Australia correspondence occurred between the two companies wherein Rosedown negotiated the purchase of particular structures at a favourable price and according to a schedule of deferred payments. The opening letter on 10 June 1992 contained the statement already referred to that Roder could maintain ownership until Rosedown completed its payments. By 23 June 1992 the point had been reached where Roder wrote a lengthy "confirmation of order letter" detailing product, and stating price, delivery dates, and a schedule for payments and interest charges. Then followed further correspondence in which the product to be acquired was varied, as was the overall price and payment schedule. On 13 July 1992 Roder wrote confirming the variations, enclosing five promissory notes for the five deferred payments, and asking for the initial payment of DM 66,500 due on placement of the order. In none of the correspondence following the letter of 10 June 1992 is any reference made to a term that Roder would retain title until payment in full. It is argued on the respondents' behalf that this indicates that no such term was contemplated. I accept Mr Fielding's evidence that the term was assumed throughout his dealings with Mr Roder, and that he purposely omitted to refer again to it in his correspondence as he hoped that the failure to mention it might later prove to Rosedown's advantage.

40. Rosedown was at first unable to raise the deposit payment. By fax dated 21 July 1992 Roder made it plain that the goods would not be delivered until the deposit was paid. Beneficial Finance Corporation Limited and Rosedown's bankers were approached, and in both instances the representations already referred to were made to the effect that Rosedown would obtain property in the goods on delivery which could then be used as security for a further advance. I accept Mr Fielding's evidence that these misrepresentations were made with Mr Tucker's knowledge as part of an attempt to keep Rosedown afloat, and that the making of them does not evidence a belief by Mr Fielding that the representations were true.

41. In the course of endeavouring to obtain finance from Beneficial Finance Corporation Limited Mr Fielding asked Roder if it would send a separate invoice for one of the tent structures (it being Rosedown's intention that the invoice would then be used as the basis for a lease transaction to raise the invoice price to fund the deposit). At first Roder refused but under considerable pressure from Mr Fielding in communications to an employee of Roder (who, it appears, may have been a clerical or secretarial assistant to Mr Roder.) Roder then agreed to split the purchase between two invoices, one for one structure to the value of DM42,300 and the other for the balance of the goods. It is contended that the fact that Roder was prepared to do this indicates that it did not intend there to be a retention of title clause. I do not accept this submission. The interpretation I place on the evidence is that Roder did not understand the purpose of the request.

42. As events turned out Beneficial Finance Corporation Limited refused to enter into a lease agreement until the invoiced goods had arrived in Australia.

43. So dismal did the prospect of obtaining the deposit appear that on 3 August 1992 it was suggested to Roder by Messrs Fielding and Tucker that Roder might consider purchasing a majority share in Rosedown, a suggestion which Roder promptly rejected. I find nothing in the communications which occurred on that day which throw any doubt on Mr Fielding's evidence that it was clearly understood that there would be a term as to retention of title if the goods were supplied pursuant to the order then awaiting the deposit payment.

44. On 6 August 1992, as the deposit had still not been paid, Roder sent a fax to Rosedown in the following terms:

"Dear Geoff, dear Michael, you know we have produced the structures for your company in day - and nightshifts, because the delivery was very urgent and we wanted to fulfill (sic) this first order from you in time.

1. We have made a refinancial deal with our bank which includs (sic) the fact that we have to show the agreed prepayment from your side.
2. To have the prepayment and the promisery (sic) note as well as a declaration from your side that the goods stay in our owner ship untill (sic) the whole purchase price is paid, is condition for the refinancing deal.
3. We regret that we cannot ship the goods as long as we do not have the prepayment and the papers from you.
4. Once again we are not very happy to make this experience. I do not hope that the various warnings we got from Australia do now become reality.
5. In case you could not fulfill our agreement we would have to inform the context you have asked us to go in touch with Kind regards, Roder Zelt-Und Hallenkonstruktionen GmbH Heinz Roder."

A fair interpretation of Mr Tucker's affidavit (para.16 and 17) is that he was unaware of this letter at the time. However in his cross-examination he conceded reading the letter on about 6 August 1992, and said: "You do not mean by that in your affidavit that you had not received and read the letter of 6 August that we have just been talking of?---What I was saying is that there was no papers to - there has always been talk, no papers have been signed on declaration of ownership, because I was still of the belief that as the goods were leased, they would be released. Well, having received that communication, were you then clear in your mind that Roder required a declaration of ownership?---I believe so." Mr Tucker had earlier said that Mr Fielding had led him to believe that once the goods were in Australia they could be leased to finance companies to raise money to pay the later installments . I accept Mr Fielding's evidence that Mr Tucker was fully aware of the nature of that scheme and was not, as he would have it, an innocent victim of someone else's dishonest proposal. But even accepting that Mr Tucker genuinely held the belief he asserts, it nevertheless involves the proposition that on delivery Roder retained title to the goods, and would do so unless and until goods were "released" for the purposes of being leased to a financier. Moreover the answer to the last of the above questions indicates that by 6 August 1992 Mr Tucker was aware of the requirement of Roder.

45. Counsel for the respondents argued that the reference to a "refinancial deal" in this letter indicates that the question of retention of title had arisen for the first time at that stage in consequence of the requirements of Roder's financier. I do not accept this submission. The letter does not state when the "refinancial deal" was made. It is reasonable to assume that for an order of this size some financial accommodation had to be arranged by Roder before manufacture commenced. I interpret the letter as an explanation for Roder's position, including the rejection of the offer to purchase a majority interest in Rosedown. Of the three conditions for the refinancing deal stated in paragraph 2 of the letter, the two other than the retention of title term were clearly specified in the letter of 13 July 1992, i.e. the requirement for promissory notes and the deposit payment. The proper inference is that the refinancing deal referred to was one already arranged at that time, and not something of very recent origin.

46. Between 6 and 20 August 1992 Mr Tucker persuaded Rosedown's banker to extend further credit to the company to enable the deposit to be paid, and that occurred by bank draft on 20 August 1992. Then followed the request for the promissory notes and declaration of ownership which led to Mr Tucker signing the document dated 21 August 1992 set out earlier in these reasons. The opening sentence of that letter is crystal clear "This is to certify that the goods you are shipping to me now will remain as your ownership until full payment is made." In the context of the events that had happened there can be no doubt as to the goods to which this certificate refers. However it is argued by counsel for the respondents that the next two sentences of the letter indicate that what was intended was not a condition retaining ownership until payment in full, but a "staged retention clause" whereby property would pass in one structure after another as amounts equal to the purchase price thereof were paid. Mr Fielding gave evidence that he was endeavouring to manoeuvre a situation where Roder could be persuaded later that the condition had that meaning. However given the earlier communications between the parties, on a fair reading of the letter Roder could not have been aware that it was the intent of Rosedown to agree only to a staged retention clause. Indeed that was not the real intention of Rosedown at the time. Rather, it was Rosedown's intention to convey the appearance that it had agreed to the condition required by Roder. The understanding of a reasonable person in the position of Roder on reading the letter would be that the condition demanded by it had been fulfilled: see Convention, Article 8(1) and 8(2). In further support of this conclusion, no steps were ever taken by Roder to comply with the request that the whole order be split up with separate pricings for each size category, and no further request was made for such a division by Rosedown.

47. It was also suggested by counsel for the respondents that the fact that when the goods were shipped a few days later three invoices were issued indicates that Roder was complying with the "staged retention clause" proposal. However a consideration of the invoices in conjunction with the shipping documents makes it clear that there were three invoices because there were three separate containers each of which required a separate bill of lading and shipping documents. The invoices then issued for each shipment do not contain a split up of the order or parts thereof to give a price for each size category as requested in the letter of 21 August 1992.

48. On 25 August 1992, four days after the certificate of 21 August 1992 had been faxed to Roder, Roder forwarded a document described in Roder's covering letter as a "declaration of the property of the tents you have purchased" to Rosedown and asked that Mr Tucker sign it. The document read as follows:

"P R O P E R T Y = = = = = = = = Notwithstanding delivery and the passing of risk in the goods, or any other provision of these Conditions, property in the contract goods shall not pass to the Buyer until the Seller has received in cash or cleared funds payment in full for the price of the contract goods and all other goods agreed to be sold by the Seller to the Buyer for which payment is then due. Until such time as property in the contract goods passes to the Buyer, the Buyer shall hold the goods as the Seller's fiduciary agent and bailee, and shall keep the goods separate from those of the Buyer and third parties and shall properly store, protect, insure and identify the same as the Seller's property and as against the Seller's invoices. Until that time the Buyer shall be entitled to resell or use the contract goods in the ordinary course of its business but shall account to the Seller for the proceeds of sale or otherwise thereof and shall keep such proceeds separate from any monies or property of the Buyer and third parties. Until such time as the property in the contract goods passes to the Buyer, the Seller shall be entitled at any time to require the Buyer to redeliver up the goods to the Seller and, if the Buyer fails to do so forthwith, to enter upon any premises of the Buyer or any third party where the goods are stored and to repossess the same. Budingen, 25. August 1992"

On 27 August 1992 Mr Fielding sent the following fax to Roder: "We have looked at the document you sent regarding the ownership of the goods and we have no basic problems with the wording. However, the last paragraph seems to be a bit onerous in that you could claim all the goods back even though we had kept to all the terms of the agreement. I know that is not your intention and you certainly wouldn't do that to us, but could you redraft the last paragraph so that we are not potentially placed in that situation." On 1 September 1992 Roder replied as follows: "Thank you very much for your fax of 27th August 1992. The property agreement is based on a proposal of our lawyer in England. He had worded this agreement. We have asked him about your inquiry but he told us that this right to take the goods back is only given in case that you fail to pay the partial amounts which we have agreed, so he does not see any problem on your side to sign that. In case we would take this right without you have given us a reason in not paying the due amounts, we would be responsable (sic) for all damages and losses on your side. So we ask you kindly to sign this agreement and send it back."

49. The receipt of this reply caused Mr Fielding to have Mr Tucker sign the certificate which, as I have found, was completed and returned by fax to Roder on 2 September 1992 with the following covering note from Mr Fielding on behalf of Rosedown: "Thank you for your fax dated 1st September, 1992 and with your assurance that the property will never be claimed back providing we stick to the terms of the agreement the original agreement has now been signed and posted back to you." Legal effect of the term/s as to retention of title

50. In my opinion, if the new clause signed on 2 September 1992 had not been proposed by Roder there would be no room for doubt that the contract for the sale of the goods was subject to a valid and effective term for the retention of title. In my opinion there was no lack of clarity in the circumstances as to the meaning and intent of the term first anticipated in discussions in May 1993 between Mr Fielding and Mr Roder; then stated in writing on 10 June 1992; stated again in the fax of 6 August 1992; and finally formally confirmed in writing in the document signed on 21 August 1992 that the goods "will remain as your ownership until full payment is made." As the term simply conveyed, ownership, that is property in the goods (see Clough Mill Ltd v Martin at 986 e-f), remained with Roder until the purchase price of DM 609,102 was paid in full. I reject the allegation that the term was too vague or unclear in its form or application to be of any contractual effect: Armour and Anor v Thyssen Edelstahlwerke AG at 352-353. As property in the goods did not pass to Rosedown before the term was agreed no question of the retention of title clause being a charge arises: Armour and Anor v Thyssen Edelstahlwerke AG, and Clough Mill Ltd v Martin.

51. The new clause signed on 2 September 1992, drafted by the English solicitor, was probably extracted from a reputable precedent for trading terms between a manufacturer and dealer in goods (cf the retention clauses considered in Compaq Computer Ltd v Abercorn Group Ltd (t/a Osiris) and Others (1993) BCLC 602 at 609-610 and Modelboard Ltd v Outer Box Ltd (in liq.) (1993) BCLC 623 at 626-627), but the terms in the second sentence of the second paragraph were inappropriate to the present situation where the goods were not supplied for the purpose of resale, and moreover the condition in the first paragraph went beyond that which had been agreed by providing for the retention of ownership until payment in full for "...all other goods agreed to be sold by the Seller to the Buyer for which payment is then due."

52. Does the signing of this new clause alter the position which would otherwise have existed? I think not. If property had not passed before 2 September 1992 because of the term confirmed in writing in the document dated 21 August 1992, a modification of the contract (see Art.29(1)) in the terms stated in the first paragraph of the new clause would not alter the situation that property remained with Roder and would do so until the condition as to payment was fulfilled.

53. The modification contained in the second sentence of the second paragraph of the new clause, although inappropriate insofar as it deals with resale, nonetheless is there and cannot be ignored. Counsel for the respondents argues that the second sentence as it purports to operate on the proceeds of sale (and possibly also on rental proceeds) constitutes a charge that required registration, and seeks support for that submission from Compaq Computers Ltd v Abercorn Group Ltd. It is argued that as one part of the new clause constitutes a charge the failure to register that charge means that the clause in its entirety is void as against Mr Eustace under s.266(1) of the Law. In my opinion it is not necessary to decide whether the second sentence of the second paragraph constitutes a charge over proceeds of sale or use as Roder is not seeking to enforce that term. In Compaq Computers Ltd v Abercorn Group the plaintiff supplier was claiming the proceeds of sale of the goods, not the goods themselves. Even though Mummery J held that the provision in the dealer agreement under which the plaintiff made its claim to the proceeds of sale was to be construed as a charge, at 614 he held that on the true construction of the dealer agreement, whilst the goods remained unsold in the hands of the dealer, the plaintiff retained full legal and beneficial ownership of them, and that the relevant provisions of the retention of title clause, which were similar to the first paragraph of the present new clause, did not confer a charge on the goods in favour of the plaintiff. Similarly in Clough Mill v Martin each member of the Court of Appeal held that the first sentence of the clause under consideration, which dealt with the goods whilst they remained in the identifiable form in which they were originally supplied, was a valid and enforceable retention of title clause, and not a charge, even if a later sentence of the clause constituted a charge over manufactured items which incorporated the goods supplied: see p.990d-e, 991a-b, 993d and 994e. Even if the second sentence of the second paragraph of the new clause constitutes a charge, the failure to register that charge is of no relevance in the circumstances of this case.

54. The term for the retention of title in the goods which Roder now seeks to enforce was not a charge and is not void as against Mr Eustace under s.266(1) of the Law. It remains necessary however to consider how the provisions of the Convention and of Part 5.3A of the Law effects the enforcement of the rights and remedies following from the ownership retained by Roder after the appointment of the administrator on 6 October 1993. Avoidance and remedies under the Convention and Part 5.3A

55. Whilst Roder alleges, and the respondents deny, that the contract of sale was "repudiated" by Rosedown, and that Roder has "accepted the said repudiation", these common law concepts and the common law remedies which could follow upon the acceptance of a repudiation of the contract by Rosedown are replaced by the provisions of the Convention. Relevantly the Convention provides:

"Article 25 A breach of contract committed by one of the parties is fundamental if it results in such detriment to the other party as substantially to deprive him of what he is entitled to expect under the contract...

Article 26 A declaration of avoidance of the contract is effective only if made by notice to the other party. ...

Article 53 The buyer must pay the price for the goods and take delivery of them as required by the contract and this Convention. ...

Article 61 (1) If the buyer fails to perform any of his obligations under the contract or this Convention, the seller may:
(a) exercise the rights provided in articles 62 to 65;
(b) claim damages as provided in articles 74 to 77.
(2) The seller is not deprived of any right he may have to claim damages by exercising his right to other remedies.
(3) ... ...

Article 63 (1) The seller may fix an additional period of time of reasonable length for performance by the buyer of his obligations.
(2) Unless the seller has received notice from the buyer that he will not perform within the period so fixed, the seller may not, during that period, resort to any remedy for breach of contract. However, the seller is not deprived thereby of any right he may have to claim damages for delay in performance.

Article 64 (1) The seller may declare the contract avoided:
(a) if the failure by the buyer to perform any of his obligations under the contract or this Convention amounts to a fundamental breach of contract; or..."

Immediately prior to 6 October 1993 Rosedown was in continuing breach of the contract of sale in that interest payments were overdue. An amount of DM 1,496.25 had become payable on 30 March 1993. The other overdue interest payments related to interest payable under a further variation of the contract made on about 10 May 1993 when Roder agreed to extend until 30 November 1993 the time for payment of DM 133,000 originally payable on 30 November 1992. It was agreed that interest calculated at the rate of 13 % p.a. would be paid on that sum, the first payment for a six month period becoming due in late May 1993, and thereafter interest was to be paid quarterly, i.e. in August 1993 and the final payment with the installment of DM 133,000 on 30 November 1993. No demand had been made for these payments, and a letter from Roder to Rosedown dated 27 September 1993 made no reference to these overdue payments. Further, Rosedown had not at 6 October 1993 assigned income expected to be received from the November 1993 Grand Prix to Roder, but that was something that could be done effectively after 6 October 1993. I am not satisfied that these breaches of contract, in the absence of notice to perform under Art. 63, constituted fundamental breaches that would justify avoidance of the contract of sale immediately prior to 6 October 1993. In any event no declaration of avoidance had been notified to Rosedown before 6 October 1993.

56. The contract of sale remained on foot when the administrator was appointed.

57. The object of Part 5.3A of the Law is stated in s.435A:

"435A The object of this Part is to provide for the business, property and affairs of an insolvent company to be administered in a way that: (a) maximises the chances of the company, or as much as possible of its business, continuing in existence; or
(b) if it is not possible for the company or its business to continue in existence - results in a better return for the company's creditors and members than would result from an immediate winding up of the company."

In furtherance of that object upon the appointment of an administrator under s.436A, and in the relatively short interim period whilst the company remains under administration (which in this case came to an end when the Deed of Company Arrangement was executed) the Law in Div.6 of Part 5.3A seeks to prevent creditors, secured and unsecured, from resorting to legal proceedings or self-help measures to enforce their rights against the company. Thus the company cannot be wound up during that period: s.440A. Generally, charges are unenforceable: s.440B; and owners and lessors cannot recover property used by the company: s.440C (but see Div.7). Proceedings in court against the company or in relation to any of its property cannot be begun or proceeded with except with the administrator's written consent or with the leave of the court: s.440D(1), and the administrator is not liable for damages if he refuses consent: s.440E. Enforcement processes in relation to the company are generally suspended: s.440F.

58. Whilst the provisions of Part 5.3A control the circumstances in which the property of the company may be recovered or taken by other parties, they do not freeze or suspend the exercise of every right held by a creditor. The provisions operate only according to their terms, and rights which are not modified or suspended may be exercised as if the administration had not occurred. Whilst s.440C curtailed Roder's right to recover the goods from Rosedown during the administration, in my opinion none of the provisions of the Law prevented Roder from notifying a declaration of avoidance of the contract. See also s.441J. In my opinion the appointment of an administrator by Rosedown constituted a fundamental breach of the contract within the meaning of Article 25 which would justify Roder notifying a declaration of avoidance. The resolution of the directors making that appointment amounted to an acknowledgment by them that the company was insolvent or was likely to become so. That fact, and the placement of the company under administration, in the circumstances of this case, resulted in such detriment to Roder as substantially to deprive it of what it was entitled to expect under the contract. The denial by Mr Eustace as agent for Rosedown (see s.437B) of the term as to retention of title also amounted to a fundamental breach of the contract.

59. The pleadings give no indication of the act which is said to constitute the "acceptance of the...repudiation". Whatever that act was, assuming there was one, it would probably constitute notification of a declaration of avoidance. I do not think the correspondence between Roder and Rosedown, and their solicitors, in October and early November 1993 can be construed as a declaration of avoidance. The correspondence concerns Roder's claim to possession of the goods - a claim which could have been made pursuant to the contract and not only as a consequence of avoidance: see Clough Mill Ltd v Martin at 988. As I have earlier observed, the evidence led by the parties hardly touches on the administration, and does not deal at all with events after 9 November 1993. If there were no earlier notification of a declaration of avoidance I consider the filing of the statement of claim should be so construed as it makes it plain that Roder at that time treated the contract as at an end. The statement of claim was filed on 13 December 1993. The evidence does not disclose whether this was during or after the period when Rosedown was under administration. Whilst Rosedown was under administration Roder's rights to possession of the goods whether pursuant to the contract or on avoidance were suspended by s.440C. No action can lie against either Mr Eustace (see s.440E) or Rosedown in respect of the refusal to deliver up the goods during this period. That refusal was not unlawful. It was a refusal sanctioned by the Law. The only redress open to Roder was to apply to court for leave to take possession (which it did), and if it were thought necessary to apply for leave to bring proceedings for declaratory relief (which it also did).

60. Upon the administration coming to an end when the Deed of Company Arrangement was executed, the protections afforded to the property of Rosedown under Div.6 of Part 5.3A came to an end. A new legal regime then came into force, being that governed by Div.10 of Part 5.3A (ss.444A to 445). The rights and obligations of creditors and the company under a deed of company arrangement are likely to be quite different: cf Commissioner of Taxation v B and G Plant Hire Pty Ltd and Others (1994) 14 ACSR 283 at 290.

61. I have already noted the power of the creditors to resolve that the administrator of a deed may be someone other than the administrator of the company. Other provisions of Div.10 of direct relevance are: "444D(1) A deed of company arrangement binds all creditors of the company, so far as concerns claims arising on or before the day specified in the deed under paragraph 444A(4)(i). (The day specified in the Deed is 6 October 1993) (2) Subsection (1) does not prevent a secured creditor from realising or otherwise dealing with the security, except so far as: (a) the deed so provides in relation to a secured creditor who voted in favour of the resolution of creditors because of which the company executed the deed; or (b) the Court orders under subsection 444F(2). (3) Subsection (1) does not affect a right that an owner or
lessor of property has in relation to that property, except so far as:

(a) the deed so provides in relation to an owner or lessor of property who voted in favour of the resolution of creditors because of which the company executed the deed; or
(b) the Court orders under subsection 444F(4).

444E
(1) Until a deed of company arrangement terminates, this section applies to a person bound by the deed.
(2) ...
(3) The person cannot:
(a) begin or proceed with a proceeding against the company or in relation to any of its property; or
(b) begin or proceed with enforcement process in relation to property of the company; except:
(c) with the leave of the Court; and
(d) in accordance with such terms (if any) as the Court imposes.
(4) In subsection (3): 'property' in relation to the company, includes property used or occupied by, or in the possession of, the company.

444F
(1) This section applies where:
(a) it is proposed that a company execute a deed of company arrangement; or
(b) a company has executed such a deed.
(2) ...
(3) ...
(4) The Court may order the owner or lessor of property that is used or occupied by, or is in the possession of, the company not to take possession of the property or otherwise recover it. (5) The Court may only make an order under subsection (4) if satisfied that: (a) for the owner or lessor to take possession of the property or otherwise recover it would have a material adverse effect on achieving the purposes of the deed; and
(b) having regard to:
(i) the terms of the deed; and
(ii) the terms of the order; and
(iii) any other relevant mater; the interests of the owner or lessor will be adequately protected.
(6) An order under this section may be made subject to conditions.
(7) An order under this section may only be made on the application of:
(a) if paragraph (1)(a) applies - the administrator of the company; or
(b) if paragraph (1)(b) applies - the deed's administrator."

62. In J and B Records Ltd v Brashs Pty Ltd (1995) 15 ACLC 458 Hodgson J in the Supreme Court of New South Wales considered whether a supplier of goods under a retention of title clause to a company that was later placed under administration, and then executed a deed of company arrangement, required leave to begin or proceed with an action under s.444E(3). The supplier argued that leave was unnecessary as it was the owner of the goods within s.444D(3), that such an owner was not bound by the deed in respect of its claim as owner under s.444D(1), and s.444E only applied to persons so bound. His Honour said at 466:

"...I have come to the view that s.444D(2) and (3) do not have the effect of removing the requirement for secured creditors and owners or lessors to obtain the leave of the court under s.444E(3) in respect of court proceedings to enforce their rights as secured creditors or owners or lessors, where those persons are creditors with claims arising on or before the day specified in the deed, and where these claims are associated with the security or property. There is some force in the submission...that this would have the result of setting up a scheme which, to some extent, would encourage self-help and resort to extra-curial enforcement or recovery procedures, which is somewhat contrary to the trend of legislation and judicial decisions in recent times. However, I think the preferable view is that those three sections were intended to set up something of a code relating to court proceedings in relation to matters concerning claims arising on or before the day specified in the deed; so that the court which is overseeing the administration of the deed will have general control of such proceedings, either by way of applications for leave under s.444E, or applications for orders limiting actions by owners or secured creditors under s.444F. In deciding whether to give leave under s.444E to a secured creditor or owner, and if so on what conditions, a court will have regard to the circumstance that under s.444F a secured creditor or owner will be restrained from extra-curial action only if the court is satisfied their interests will be adequately protected."

With those conclusions I respectfully agree. In the particular circumstances of that case leave was held to be unnecessary as the cause of action was based on an undertaking given by the administrators after the day specified in the deed. In the present case however, the essential rights which Roder seeks to enforce are its rights as owner of the goods, rights that existed before 6 October 1993. For the purposes of s.444E(3), insofar as remedies are now sought against Rosedown (e.g. for declaratory relief, delivery up and damages for wrongful detention) this action is obviously a "proceeding against the company". Insofar as additional or other relief is sought against Mr Eustace this action is one "in relation to any of its property": see s.444E(4). So a precondition to the pursuit of this action is leave under s.444E(3). The action has throughout been prosecuted on the footing that the leave to proceed given under s.440D(1)(b) on 9 November 1993 fulfils this condition. No point to the contrary has been taken by the respondents in their pleadings or otherwise. In my opinion the leave given under s.440D(1)(b) only authorised the prosecution of the action against the company whilst under administration, and against Mr Eustace as administrator of the company. When the administration came to an end, s.444E(3) then came into operation so as to require a further grant of leave. That further leave was required is readily explained by at least two considerations. First, the administrator of the deed may not be the administrator of the company: s.444A(2). Secondly, different considerations will apply in many cases when considering the merits of the enforcement of the proposed claims. For example in the present case one claim made in the proceedings at the time of the order on 9 November 1993 was a claim under s.440C. At 9 November 1993 there appeared an urgent need to address the entitlement of the owner (if Roder could establish ownership) to recover its depreciating goods as no adequate recompense was offered by the administrator for the continued use of the goods, and no other provision of the Law appeared to offer an avenue for ordering recompense to Roder during the continuance of the administration (s.443B(2) was of doubtful application, the contract of sale not providing for any rent or other periodic payment to recompense for actual use of the goods). However once the administration ended, so did the restrictions imposed by s.440C. Then s.444F came into operation. Under s.444F the owner of goods in the possession of the company is not prevented from recovering them unless the court so orders under s.444F(4) on application of the appropriate administrator (s.444F(7)), and such an order may only be made if the court is satisfied as required by s.444F(5). As Hodgson J observed in J and B Records Ltd v Brashs Pty Ltd (supra) the provisions of s.444F will be a consideration in deciding whether to give leave under s.444E(3).

63. The absence of an order giving leave to proceed is a matter which Roder must now address. As the case has been conducted throughout on the footing that the requisite leave had been obtained, and as there has been no application under s.444F(4) or offer of recompense for the continuing use of the goods, it may be appropriate to grant leave nunc pro tunc from the day after the administration of Rosedown came to an end (see s.447A). I will hear the parties on this question.

64. Subject to the question of leave, Roder is entitled to enforce the rights and obligations which arose on the avoidance of the contract under the Convention. So too is Rosedown. Relevantly the Convention provides, first as damages:

"Article 74 Damages for breach of contract by one party consist of a sum equal to the loss, including loss of profit, suffered by the other party as a consequence of the breach. Such damages may not exceed the loss which the party in breach foresaw or ought to have foreseen at the time of the conclusion of the contract, in the light of the facts and matters of which he then knew or ought to have known, as a possible consequence of the breach of contract.

Article 75 If the contract is avoided and if, in a reasonable manner and within a reasonable time after avoidance, the buyer has bought goods in replacement or the seller has resold the goods, the party claiming damages may recover the difference between the contract price and the price in the substitute transaction as well as any further damages recoverable under article 74.

Article 76 (1) If the contract is avoided and there is a current price for the goods, the party claiming damages may, if he has not made a purchase or resale under article 75, recover the difference between the price fixed by the contract and the current price at the time of avoidance as well as any further damages recoverable under article 74. If, however, the party claiming damages has avoided the contract after taking over the goods, the current price at the time of such taking over shall be applied instead of the current price at the time of avoidance. (2) ..."

and secondly as to restitution:

"Article 81 (1) Avoidance of the contract releases both parties from their obligations under it subject to any damages which may be due... (2) A party who has performed the contract either wholly or in part may claim restitution from the other party of whatever the first party has supplied or paid under the contract. If both parties are bound to make restitution, they must do so concurrently.

Article 84 (1) If the seller is bound to refund the price, he must also pay interest on it, from the date on which the price was paid. (2) The buyer must account to the seller for all benefits which he has derived from the goods or part of them: (a) if he must make restitution of the goods or part of them;..."

There is no evidence before the Court which enables the application of these provisions to be further discussed. I note that immediately upon his appointment as administrator Mr Eustace obtained an "auction realisation" valuation of the plant and equipment of Rosedown, and that may be of some assistance to the parties in the application of Article 76 should that be appropriate.

65. Roder complains that its loss and damages are ongoing, and will continue until the goods are returned. As Roder cannot resell the goods for the purpose of Article 75, nor make restitution as required by Article 81, until the goods are returned, the appropriate date at which to assess the net result of applying the above Articles could be the date of return of the goods. In the unlikely event that the net result were in favour of Rosedown, there would be no practical point in Roder pursuing a claim against Mr Eustace. 66. On the other hand if the net result is in favour of Roder, Roder will obviously wish to obtain judgment against Rosedown and Mr Eustace in respect of their respective liabilities - unless the fortunes of Rosedown have now so improved that Roder is content to await payment by the company of its entitlement assessed under the Convention.

67. It is necessary therefore to consider the liability of Rosedown and of Mr Eustace for the refusal to return the goods to Roder. I have already indicated that Mr Eustace incurred no liability for the refusal to return the goods whilst Rosedown was under administration. However, when he became the administrator of the Deed he lost the protection of ss.440C and 440E.

68. By s.444A(5) the Deed is taken to include the prescribed provisions, except so far as it provides otherwise. By Regulation 5.3A.06 the prescribed provisions are those set out in Schedule 8A. Paragraph 1 of Schedule 8A provides that in exercising the powers conferred by the Deed and in carrying out the duties arising under it, the administrator (of the deed) is taken to act as agent for and on behalf of the company; and under paragraph 2(a) the administrator has the power to enter upon and take possession of the property of the company. A draft of the Deed (the only evidence of its terms before the Court) did not otherwise provide. The affidavit evidence of Mr Eustace read at trial indicates that in his capacity as administrator of the Deed, and agent of Rosedown, he has denied Roder's claim for possession and delivery up, and has defended these proceedings. In the result Roder has established that the contract of sale included a valid term for the retention of title until payment in full; that it is the owner of the goods; and that, absent an order under s.444F(4), it has been entitled to immediate possession of the goods from the time when the Deed of Company Arrangement was executed. Both Mr Eustace personally and Rosedown are liable to Roder for the tort of conversion for interfering with the possessory rights of Roder. The tort is committed by an agent even where the agent acts in good faith without any intention to commit a wrong: J G Fleming, The Law of Torts 8th Ed. at 56, and even though he does not act on his own account or for his personal benefit: Salmond and Heuston on the Law of Torts, 20th Ed. 111. See generally Bowstead on Agency 15th Ed. at 386 and 495 ff. The conventional measure of damages for conversion is the value of the goods at the date of the wrong: McGregor on Damages 15th Ed. paras. 1298 ff - in this case the value of the goods at the date when the Deed was executed. In addition Roder would be entitled to interest under the Federal Court of Australia Act 1976 (Cth), s.51A from that date. If the value of the goods at that date and interest thereafter is allowed, it is difficult to follow how Roder would have any additional right to compensation for "rental value" from that date. If the goods are now returned, credit will have to be allowed for their present value. The judgment for damages for conversion, when assessed, will be entered jointly and severally against both Rosedown and Mr Eustace. If the loss and damage of Roder against Rosedown under the Convention provisions is assessed at the date of return of the goods there is likely to be some overlap between the judgment entered against Rosedown on that cause of action, and the judgments entered for conversion. Roder cannot recover more than its full loss. It cannot recover its loss in full under a judgment entered against one respondent, and then recover further moneys under a judgment against the other respondent. So if Rosedown is able to discharge the judgment against it that will also satisfy the judgment against Mr Eustace. If not, Mr Eustace will remain liable to discharge the judgment against him.

69. I publish these reasons and my associate will communicate with the parties to arrange a convenient time to relist the matter.

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Case commentary

Reproduced with permission from Pace ed., Review of the Convention on Contracts for the International Sale of Goods (CISG) 1998, Kluwer Law International (1999) 53-62

Comment on Roder Zelt- und Hallenkonstruktionen GmbH v. Rosedown Park Pty Ltd

Jacob S. Ziegel [*]

I. Introduction

Roder Zelt- und Hallenkonstruktionen GmbH v. Rosedown Park Pty Ltd. [1] ("Roder"), a decision of Judge Van Doussa of the Federal Court of Australia, South Australian District, is apparently the first reported Australian decision to address CISG issues related to the United Nations Convention on Contracts for the International Sale of Goods.[2] This alone would justify a comment on the case, particularly given the paucity of CISG judgments in common law jurisdictions that have adopted the Convention.[3] There is however another and still stronger reason for this comment the Australian court's decision squarely raises the issue (for the first time so far as I am aware) of whether the CISG applies to the seller's remedies under an installment sale [4] where the goods have been delivered and accepted by the buyer and where the seller has retained title pending payment by the buyer of the price by agreed installments or otherwise.[page 53]

My comment will focus primarily on this issue and deal summarily with several other CISG questions raised by the facts though not necessarily addressed by the judgment.

II. The Facts

Roder is a German manufacturer of tents and other prefabricated structures for public functions. Rosedown was in the business of renting out such equipment for large sports events in Australia. Roder agreed to supply Rosedown with its equipment needs and Rosedown agreed to pay the price by installments with interest after the equipment had been delivered in Australia. The agreement contained a title retention clause in Roder's favor and also provided that until the payments had been completed Rosedown was deemed to be a fiduciary agent and bailee of the equipment. The agreement also contained the usual provisions in a conditional sale agreement requiring Rosedown to keep the equipment insured and in a proper condition, not to sell it, and requiring Rosedown to account for the proceeds of sale or otherwise (sic) and to keep the proceeds separate from other property.

Rosedown fell seriously in arrear with its payments to Roder and was generally in acute financial difficulties. While in this condition, Rosedown's directors adopted a resolution appointing an administrator of Rosedown's business pursuant to the Commonwealth Corporations Law. Rosedown's creditors subsequently approved a Deed of Arrangement for the restructuring of Rosedown's business and the payment of its debts.

Following the appointment of the administrator, Roder initiated action claiming the return of its equipment on the ground that Rosedown had repudiated its contract because of the failure to maintain its interest payments and for other breaches of contract. This meant that Judge Van Doussa had to consider which law governed the interpretation of the parties' contract, including the title retention clause, and the rights and obligations of the parties under the contract. He also had to consider the effect of the administrator's appointment and the subsequent Deed of Arrangement on Roder's right to recover the equipment from the administrator, assuming there was a valid title retention clause to begin with.

The judge found that the contract of sale was governed by the CISG since both Germany and Australia had ratified the Convention. This meant that the parties' rights were governed by the Convention, including Roder's [page 54] right to avoid the contract under arts. 61 and 64, because of a fundamental breach of contract by Rosedown. Judge Van Doussa held that the parties' pleadings were wrongly framed in the common law language of repudiation and should have alleged instead that the seller was entitled to avoid the contract and had done so, and was therefore entitled to return of the equipment.

In the judge's opinion, Rosedown's failure to maintain its interest payments did not constitute a fundamental breach because Roder had not complained about the missing payments before the administrator's appointment and had not invoked its right under article 63 giving Rosedown an additional period of time before avoiding the contract. He found however that the appointment of the administrator and the directors' resolution making the appointment, with its acknowledgment that the company was insolvent, resulted in such detriment to Roder as substantially to deprive it of what it was entitled to expect under the contract.

So far as the title retention clause was concerned, in the court's opinion, its construction and meaning were governed by the CISG, [5] but the validity of the clause was governed either by German or Australian domestic law since the validity and property effects of a sale contract are expressly excluded from the Convention's scope.[6] He found that both German and Australian law recognized the validity of Romalpa clauses.[7] This also meant, once Roder exercised its right of avoidance, that it was entitled to recover its property because Rosedown no longer had any rights to the equipment under the contract. Conversely, Rosedown would be entitled to claim restitution for any payments made by it under the contract [8] although Roder would also have a claim against Rosedown for damages. The court also found that the administration and arrangement provisions in the Corporations Law did not change a creditor's property rights with respect to property in the administrator's hands, but that the creditor needed the court's permission to enforce its rights. Judge Van Doussa gave that permission.[page 55]

III. Discussion

A. Status of installment Sales under CISG

The Roder case is an instructive example of the dynamic interplay between CISG law and domestic rules governing the validity of title retention clauses and the impact of a buyer's insolvency and restructuring. The Australia court's decision is however open to question on the following critical issue. Judge Van Doussa assumed, without discussion, that an installment sale (conditional sale agreement in North American parlance) in which the buyer obtains possession and use of the goods,[9] but the seller retains title until payment of the price or fulfillment of other conditions, is fully subject to the remedial provisions of the Convention just like any other contract of sale.

This is an unsafe assumption. From the turn of this century onwards, for at least some purposes, many US courts treated conditional sale agreements in which the buyer obtained possession of the goods and enjoyed most of the benefits of ownership, other than the bare title, as a short form of mortgage. The American Uniform Conditional Sales Act of 1918 recognized many of the special characteristics of conditional sales. Article 9 of the American Uniform Commercial Code completed this assimilation with the adoption of the Code in the 1950s. Under Article 9 the seller in a title retaining contract merely retains a security interest in the goods and the buyer is treated as the beneficial owner of the goods.[10] If a buyer defaults in its payments the seller's remedies lie under Part V of Article 9 and not under Part VII of Article 2 on Sales.

In Canada, conditional sale agreements have followed a similar evolution [11] although the earlier history was more clouded than it was in the United States. All the common law jurisdictions in Canada have now [page 56] adopted personal property security legislation (PPSAS) based on Article 9 of the Uniform Commercial Code.[12] In Canada, therefore, as in the United States, the seller in a conditional sale agreement merely retains a security interest in the goods. Consequently, the personal property security Acts and not the provincial sale of goods Acts regulate the seller's rights if the buyer defaults in its payments or other terms of the agreement.

The CISG does not define contract of sale and there is no provision expressly excluding conditional sale agreements from its scope. It must also be remembered that most other countries (including most other common law jurisdictions) do not subscribe to the North American characterization of conditional sale agreements.[13] In those countries such agreements are still treated as a special form of executory contract of sale. This is true even though the seller's remedies are often governed by statutory restrictions not essentially different from the consumer safeguards found in Article 9 and in the Canadian PPSAs.

These divergences in the national treatment of conditional sale agreements make it unclear how such agreements should be treated under the CISG. In my view, notwithstanding the uncertainties I have alluded to, the CISG's remedial regime is not appropriate once the buyer has obtained possession of the goods, and imposing the CISG rules willy nilly on conditional sale agreements will lead to fictions and distortions. Once the seller has performed its obligations under the agreement, I believe the security aspects should be treated as wholly outside the CISG and as governed by domestic law under the relevant conflict of laws rules.

The inappropriateness of the CISG provisions may be seen by asking what happens when the buyer is in default with its payments and by contrasting the consequences with the remedial regimes provided in Article 9 [page 57] and the Canadian PPSAs. Under the CISG, if the seller wants to repossess the goods it can apparently only do by avoiding the contract if the buyer's failure to make a payment or to meet other conditions of the contract amounts to a fundamental breach.[14] If the contract is avoided, the seller loses the right to sue for the price but is remitted to a claim in damages.[15] The seller is, however, entitled to retain the goods as its own and, once the contract is avoided, the buyer has no right to redeem the goods regardless, it would seem, of how much of the price has been paid. The same preclusion will apply to the buyer's trustee in bankruptcy or liquidator if the buyer has become insolvent. Following avoidance of the contract, the CISG entitles the buyer to recover its payments [16] subject to the seller's right of set-off for the buyer's use of the goods while they were in the buyer's possession.[17]

All of this is terribly unreal. The seller's retention of title only serves a security function and by repossessing the goods and selling them the seller is only enforcing its security.[18] The contract is not meant to be avoided and the buyer should remain liable for the balance of the price. If there is a surplus after the resale, it should go to the buyer because this consequence too flows from the security function of the agreement. Given the true nature of the conditional sale agreement, Article 9 and the Canadian PPSAS also entitle the buyer to redeem the collateral prior to its sale by the seller unless after default the buyer has agreed to the seller retaining the goods in satisfaction of the seller's claims.

In all these respects, Article 9 and its Canadian counterparts are not only greatly superior to the CISG provisions but, in my view, they provide the only sound and workable conceptual structure. No doubt the same can be said of the many similar provisions in domestic systems specifically addressing the distinctive features of installment sales even though they do [page 58] not go as far as Article 9 in fully assimilating installment sales with other security devices. So far as I have been able to ascertain, only Prof. Peter Winship appears before me to have raised the status of installment sales under CISG and then on a much more limited basis than what I have attempted to do.[19] In a footnote in an excellent chapter by him on the scope of the Convention, he notes that ULIS art. 5(2) subordinated the uniform law to mandatory national legislation protecting buyers who purchased by installment.[20] He goes on to report that at the 1980 conference, the Norwegian delegate questioned whether the Vienna text dealt adequately with the consequences of the buyer's failure to pay all installments and, upon being reassured that the settlement of accounts of parties to these contracts would be deemed excluded from the convention under article 6 (sic), the delegate withdrew an amendment to clarify the matter.[21]

Obviously the delegate should have been more persistent.

Let me make myself clear. I am not suggesting that the CISG has no application to installment sales. What I am saying is that the Convention should only apply to the sales component and not to the security aspects of the agreement. If this distinction is observed, the CISG will determine whether a sale agreement has been concluded, the terms of the agreement, and the seller's obligations with respect to the description and quality of the goods and their delivery. Once conforming goods have been delivered to the buyer, the security part of the agreement will be triggered and will determine the seller's and buyer's rights and obligations from this point onwards. This dichotomy is accepted in Article 9 and the Canadian Acts and works well in practice.

Thus UCC 9-206(2) provides that, "When a seller retains a purchase money security interest in goods the Article on Sales (Article 2) governs the sale and any disclaimer, limitation or modification of the seller's warranties." I see no difficulty in applying the reverse distinction to CISG, that is that where the seller retains title to the goods after delivery pending payment of the price the validity of the title retention clause and related issues will be governed by non-CISG law.[page 59]

B. Other Aspects of the Roder Decision

1. Construction and meaning of the title retention clause.

As previously noted, Judge Van Doussa held that the CISG governed the construction and meaning of the title retention clause even though the validity of the clause was determined by German or Australian law. His approach is consistent with the structure of the Convention but it is also a little artificial. For example, the municipal law governing the validity of the title retention clause may require the contract to be evidenced in writing as a condition of the enforceability of the clause or the attachment of the seller's security interest.[22] If this is the case, I suggest the municipal rule must prevail regardless of any conclusion the court may reach with respect to the parties' intentions under art. 8 of the Convention. It may be argued that a distinction should be drawn between the validity of the clause inter partes and its validity with respect to third parties and that since art. 11 does not require CISG contracts to be in writing, the clause is effective between the parties. This solution too is strained. Since we are concerned here with the property effects of the contract, the better view, I believe, is that the forum should defer entirely to the requirements of the municipal law governing the seller's retention of a security interest.

2. Fundamental breach and avoidance of the contract.

There are two aspects here of the court's judgment that warrant consideration. The first arises from the judge's finding that Rosedown's failure to maintain its interest payments did not constitute a fundamental breach because Roder had not complained about the missing payments before the administrator's appointment and had not invoked its right under art. 63 giving Rosedown an additional period of time before avoiding the contract. The difficulty about this reasoning is that art. 63(1) is a discretionary provision and does not oblige the seller to give the buyer an additional period of time if the seller is satisfied that the delay that has already occurred amounts to a fundamental breach.

There may be circumstances -- the facts in this case may be among them -- where the breaching party can argue that it has been lulled into a [page 60] false sense of security by the seller's failure to complain and that there was an implicit understanding between the parties, supported perhaps by prior usage and practice between them or by usages in the trade, that the seller will give notice before declaring the contract to be avoided. Unfortunately, given his initial holding, Judge Van Doussa did not explore these alternative avenues.

The second aspect of his judgment deserving further analysis is his finding that the appointment of the administrator and Rosedown's directors' acknowledgment that the company was insolvent amounted to a fundamental breach of Rosedown's contractual obligations. Article 25 of the Convention is strikingly silent in telling us anything about the type of conduct that may lead to a fundamental breach. Must it be volitional or may it be triggered by a condition, such as insolvency, totally unsought for by the allegedly breaching party? It seems safe to assume from art. 71(1) that the latter construction is the correct one. This is because art. 71(1) entitles a contracting party to seek assurance of performance if it appears that the other party will not be able to perform a substantial part of its obligations because of a "serious deficiency in his ability to perform or in his creditworthiness". If the buyer's insolvency is sufficient to trigger art. 71(1) it must surely also be sufficient to provide the basis for a fundamental breach claim.

Even conceding this, it is debatable whether the Australian judge invoked the right article. Since he had already held that there was no fundamental breach prior to Rosedown's declaration of insolvency, arguably art. 72 on anticipatory repudiation and not art. 25, was the right article to invoke. It makes a difference because art. 72(2) requires the party intending to avoid the contract to give notice of its intention if time allows. In Roder there appears to have been no urgency although notice to the administrator would probably have made no difference since the administrator was taking the position that the parties had not agreed on a title retaining clause.

A cognate issue also deserving of some consideration is the court's decision that the notice of avoidance required by art. 26 as the condition for an effective avoidance was satisfied by Roder's initiation of proceedings for the recovery of its property. Art. 26 does not stipulate any particular type of notice. Still, as CISG observers have noted, reasonableness is a pervasive behavioral norm throughout the Convention and one can visualise circumstances where issuing a writ is too blunt an instrument for giving notice of avoidance.[23] [page 61]

3. Insolvency Stay of Proceedings and Seller's Rights under CISG.

This is another feature of Roder that merits some attention. A standard provision in modern insolvency legislation is the imposition of a stay of proceedings and other action by creditors and other parties against the debtor. The stay may be exceedingly broad in its scope [24] and may include a stay on a seller's right to avoid a contract under an installment sale. So, for example, the Australian Corporations Law prohibited the initiation of proceedings against an administrator without the court's permission.

Judge Van Doussa did not consider whether these provisions created a conflict with the seller's right of avoidance under the CISG and the right of return of its property. Since the issue does not appear to have been raised, one can only speculate what his answer would have been. One possible answer is that the CISG is not concerned with the mechanics for the enforcement of the parties' rights but leaves this to be determined by the forum's law. The other, and in my view more persuasive, answer is that issues of insolvency law lie wholly outside the CISG's realm. This is because insolvency law involves the totality of a debtor's relationship with its creditors and not just one creditor (the seller), whereas the CISG only speaks to the rights and obligations of the parties to the particular contract.[25]

IV. Conclusion

My discussion of the legal issues arising from Roder is far from exhaustive but should provide much grist for other CISG commentators. Hopefully too other tribunals will have an opportunity to explore and refine the issues that were left untouched in the Australian judgment or were not adequately disposed of.[page 62]


FOOTNOTES

* Professor of Law Emeritus, University of Toronto

1. 28 April 1995, [1995] 57 Fed Court Rep 216-240; UNILEX database 1996; Pace CISG Caselaw "http://cisgw3.law.pace.edu/cases/950428a2.html."

2. United Nations Convention on Contracts for the International Sale of Goods, 19 I.L.M. 668 (1980) [hereinafter CISG]

3. By way of contrast, although Canada adopted the Convention in 1991, effective 1 May 1992, there is still no reported decision involving the Convention.

4. Usually referred to in North America as a "conditional sale" or "conditional sale agreement".

5. See CISG arts. 8, 11, 15, 18 and 29.

6. See CISG art. 4(a) and (b).

7. Romalpa clauses is the name given in England and Australia to title retention clauses in commercial installment contracts where the purchased goods consist of inventory to be resold or leased out by the buyer in the ordinary course of its business. The name Romalpa is derived from the English Court of Appeal decision affirming the validity of the clause in this context as well as in the more common context of goods used by the buyer as equipment. See Aluminium Industrie Vaassen B.V. v. Romalpa Aluminium Ltd. [1976] 1 Lloyd's Rep. 443 (Eng. C.A.).

8. See CISG arts. 81, 84.

9. Including, in the case of goods characterized as inventory, the right to sell or lease the goods in the ordinary course of the buyer's business.

10. See UCC 9-102 (1991) (scope of application), 1-201(37) (definition of security interest), and 9-107 (definition of purchase money security interest). In the spring and summer of 1998 the Code's sponsors approved a revised Article 9 but this is not expected to come into force in any state until January 1, 2001. The revised version of Article 9 retains all the basic features of existing Article 9.

11. See R.M. Goode & J.S. Ziegel, Hire-Purchase and Conditional Sale: A Comparative Survey of Commonwealth and American Law, 13-16 (1965).

12. See J.S. Ziegel, The New Provincial Chattel Security Regimes 70 Can. Bar Rev. 681 (1991). Quebec also adopted some important features of Article 9 in the new Québec Civil Code of 1994, including the general recognition of non-possessory security interests in moveables and the requirement of perfection of such interests in a newly established and computerized registry system. However, the new chattel security regime does not apparently include conditional sales. See also M. Boodman & R. Macdonald, How Far is Article 9 of the Uniform Commercial Code Exportable? A Return to Sources? 27 Can. Bus. L.J. 249 (1996).

13. However, following an earlier strongly supportive report, the New Zealand government has announced its intention to adopt a Personal Property Securities (sic) Act along Canadian lines. A draft bill was circulated for discussion in October 1998.

14. See CISG Arts. 64, 25. The contract could authorize the seller to repossess the goods and resell them, whether or not the buyer's breach amounts to a fundamental breach, and hold the buyer liable for any deficiency. Such provisions commonly appear in conditional sale agreements. However, at common law (and I assume in the civil law as well) such provisions raise troubling conceptual questions since it is difficult to explain in sales terms why the buyer should continue to be liable to pay the balance of the price if the seller has sold the goods and is no longer in a position to transfer title to the buyer.

15. See CISG Arts. 62, 74, 81(1).

16. See CISG Art. 81(2).

17. See CISG Art. 84(2).

18. Cf. Article 9, Part V, §§ 9-501 et seq., and Ontario Personal Property Security Act, Rev. Stat. Ont. 1990. c.P-10 as am., Part V, §§ 58-66.

19. Peter Winship, The Scope of the Vienna Convention on International Sales Contracts, in International Sales: The United Nations Convention on Contracts for the International Sale of Goods 1-24, n.48 (Nina M. Galston & Hans Smit eds., 1984).

20. See id.

21. See id.

22. Cf. UCC 9-203(1)(a) (1991) (security interest does not attach and security agreement is not enforceable against debtor or third parties unless collateral is in secured party's possession or there is an agreement in writing).

23. A possible example that comes to mind is where a buyer initiates proceedings to avoid a contract because of defective goods. Prof. John O. Honnold and other CISG scholars take the position that there is no fundamental breach where the seller makes a timely and credible offer to cure the nonconformity. Will the beginning of court proceedings deprive the seller of a right to cure? One hopes not, and that the seller should be able to argue that had the buyer adopted a more appropriate form of notice the court proceedings would have been unnecessary.

24. See, e.g., § 362 of the US Bankruptcy Code, 11 U.S.C. § 362 (1994). In Canada, the courts also have given a very elastic meaning to the scope of a stay order issued under § 11 of the Canadian Companies' Creditors Arrangement Act, Rev. Stat. Can. 1985.

25. See CISG Art. 4, opening sentence.

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