In GE Commercial Corporation (Aust) Pty Ltd v Mell
Associates Pty Ltd & Ors  NSWSC 787, GE sought
declarations that it had title to caravans which it bought from
Oakhurst. Oakhurst purchased the caravans from LMC. LMC said it was
not paid for the caravans and cross-claimed that it had title under
a retention of title ("ROT") clause.
Oakhurst had gone into liquidation and was not a party to the
LMC claimed that the goods were sold to Oakhurst pursuant to
terms on each invoice. To finance the purchase, Oakhurst entered
into a floor plan arrangement with GE which comprised a
Distribution Agreement, Bailment Agreement and Fixed and Floating
Charge. Under the Bailment Agreement, Oakhurst warranted that upon
purchase of goods, GE would have absolute and clear title and be
entitled to possession free of all adverse interests. The usual
practice was that upon receipt of an invoice from LMC, Oakhurst
would send to GE a copy of the invoice and a Payment Statement. GE
would then pay LMC by direct transfer. LMC would send Oakhurst a
spreadsheet of items supplied and Oakhurst would mark off which
items were paid for by the payments. LMC would apply the funds from
GE towards payment of those items. Oakhurst also supplied GE with a
list of items paid for. The parties agreed that 58 caravans were
the subject of the dispute in that they were marked as being unpaid
in LMC's list, and paid in GE's list. LMC relied on the ROT
clause to assert that it still owned those caravans.
Whether sale contract included ROT clause
The front of each invoice stated that the supply was made in
accordance with the general terms of trade. At the back of each
invoice, the terms were titled "Conditions of Sale and
Delivery". Although the terms were in German, Oakhurst could
not argue it did not accept them on the basis it did not understand
them, as it never objected or requested a translation, and
continued dealings. Palmer J found that the terms on the back of
the invoices were incorporated as terms in each contract for
Whether ROT clauses void for uncertainty
There were 4 apparent ROT clauses on each invoice. The first
provided that title in the goods supplied by that invoice remained
with LMC until payment. This appeared on the front of the invoice.
The second provided that title passed only when all moneys due to
LMC during the course of the dealership had been paid.
LMC argued that as it had not been paid for the 58 caravans, it
still had title to them under the first ROT clause.
This argument failed. The Court held that these two ROT clauses
were merely reminders that there were ROT clauses on the back of
the invoice, and were not intended to be contractual terms.
Whether Clause 3 authorised on-sale with title
The third ROT clause ("ROT-3") was at
the back of the invoice, being the first part of Clause 3. It
provided that LMC retained title until all payments originating
from the business relationship with LMC were received. The fourth
ROT clause ("ROT-4"), being the last
part of Clause 3, authorised the on-sale and passing of title of
the goods. In effect, ROT-4 assigned to LMC the right to receive
the proceeds of sale.
The relationship between LMC and Oakhurst continued for many
years. If ROT-3 was applied without qualification, it could produce
the uncommercial result that none of Oakhurst's customers would
receive title to the caravans if Oakhurst went into liquidation in
later years with monies unpaid to LMC. LMC would have the right to
repossess caravans sold years ago if Oakhurst defaulted.
ROT-4 was said to avoid these consequences by allowing Oakhurst
to on-sell the goods, and pass title to the customer. Once sold,
LMC had a right to the proceeds of sale.
The Court held that in accordance with ROT-4, title in the 58
caravans passed to GE when Oakhurst sold them to GE in the ordinary
course of it business. GE was entitled to possession.
The Court declared that GE had good title to the 58 caravans as
The content of this article is intended to provide a general
guide to the subject matter. Specialist advice should be sought
about your specific circumstances.
To print this article, all you need is to be registered on Mondaq.com.
Click to Login as an existing user or Register so you can print this article.
On 12th November 2016, new laws will commence to protect small businesses from unfair terms in standard form contracts.
Some comments from our readers… “The articles are extremely timely and highly applicable” “I often find critical information not available elsewhere” “As in-house counsel, Mondaq’s service is of great value”
Register for Access and our Free Biweekly Alert for
This service is completely free. Access 250,000 archived articles from 100+ countries and get a personalised email twice a week covering developments (and yes, our lawyers like to think you’ve read our Disclaimer).