Ali v Mohamed and Co (Civ. App. No. 16/ 1938) [1938] EACA 204 (1 January 1938)

## APPELLATE CIVIL

### BEFORE THACKER J.

# MUBARAK ALI, Appellant (Original defendant)

# WALI MOHAMED & Co., Respondents (Original plaintiffs) Civ. App. No. 16/1938

Sale-Warranty of title-Sale by apparent owner-Definition of 'seller"-Sale of Goods Ordinance, 1930, secs. 2 (1), 23 and $26(2)$ .

One B., who was in possession of a motor car under a hirepurchase agreement containing an option to purchase, without exercising the option purported to sell the car to the appellant who bought in good faith. The respondents later bought the car in good faith from the appellant. The owner then seized the car while it was in the respondents' possession on account of non-payment of hire by B. The respondents claimed damages for breach of warranty of title.

*Held* $(27-5-38)$ .—That the word "seller" in section 26 (2) of the Sale of Goods Ordinance, 1930, can only refer to one who has power to pass a good title by sale: the subsection does not protect a purchaser whose immediate vendor has bought from someone with no title or authority at all.

Khanna, for the appellant, submitted that under section 26 (2) $\sim$ of the Sale of Goods Ordinance the respondents received a good title. B. was a "seller" as defined by section 2 of the Ordinance. Appellant was a person who had bought or agreed to buy and was in possession. Both appellant and respondents acted innocently and honestly. All the requirements of section 26 (2) were fulfilled.

Brian Figgis, for the respondents, submitted that the word-"seller" in section 26 (2) must refer only to someone who has power to pass a good title by sale.

JUDGMENT.—This is an appeal from the judgment of the Resident Magistrate's Court at Nairobi and the nine grounds of appeal are set out in the Memorandum of Appeal. In his judgment the magistrate found for the plaintiffs damages of Sh. 286/40 and his judgment sets out the reasons therefor.

There was only one witness called in the lower Court and this appeal turns entirely on matters of law. A memorandum of admitted facts was subscribed to by both Counsel and is on the record, and this Court was informed by Counsel for both parties that such memorandum with the evidence of the one witness and Counsel's. legal argument was sufficient for the determination of the case.

The facts so admitted appear to be as follows:-

1. One Bounvialle was the hirer in possession of a motor car the subject of a hiring agreement with its owners the Motor Mart $Ltd.$ The agreement is on the record. The agreement contained a clause forbidding assignment. There was merely an option in the hirer to purchase, which option was never exercised, and the hirer could terminate the agreement by returning the car. The agreement is not a contract to purchase the car.

2. With Sh. 286/40 unpaid. Bounvialle through the agency of one Lal Singh, a car dealer, sold the car to the defendant for Sh. 150. It would appear that Lal Singh was an agent from the wording on the receipt and record, although the record is not quite clear as to this. However, I will assume for the purposes of the appeal that Lal Singh was and acted as agent as is alleged by the appellant.

3. The defendant had no notice of the Hire Purchase Agreement or of the rights of the owners of the car, the Motor Mart, under the agreement.

4. The defendant bought the car bona fide from Lal Singh.

5. The defendant sold the car to the plaintiffs for a consideration which is not material to the issue. The appellant's Counsel did not admit this was a sale, but like the magistrate I think it was.

6. The plaintiffs bought the car bona' fide without notice of defect of title.

Now section 23 of the Sale of Goods Ordinance, 1930, is as follows:-

"23. (1) Subject to the provisions of this Ordinance, where goods are sold by a person who is not the owner thereof, and who does not sell them under the authority or with the consent of the owner, the buyer acquires no better title to the goods than the seller had, unless the owner of the goods is by his conduct precluded from denying the seller's authority to sell.

(2) Provided also that nothing in this Ordinance shall affect: -

- (a) the provisions of any enactment enabling the apparent owner of goods to dispose of them as if he were the true owner thereof; - (b) the validity of any contract of sale under any special $\frac{1}{2}$ common law or statutory power of sale or under the order of a Court of competent jurisdiction."

Now the Motor Mart were the owners of the car which Bounvialle purported to sell to the defendant and clearly looking at this section alone the defendant took no title, because Bounvialle was not the owner.

But it is said by the appellant that by section 26 (2) the plaintiffs got a good title from defendant as against the Motor Mart. Section 26 (1) is as follows: $-$

"26. (1) Where a person having sold goods continues or is in possession of the goods, or of the documents of title to the goods, the delivery or transfer by that person, or by a mercantile agent acting for him, of the goods or documents of title, under any sale, pledge, or other disposition thereof, to any person receiving the same in good faith and without notice of the previous sale, shall have the same effect as if the person making the delivery or transfer were expressly authorized by the owner of the goods to make the same".

Section 26 $(2)$ which is the converse of section 26 $(1)$ is as follows: -

"26. (2) Where a person having bought or agreed to buy goods obtains, with the consent of the seller, possession of the goods or the documents of title to the goods, the delivery or transfer by that person, or by a mercantile agent acting for him, of the goods or documents or title, under any sale, pledge, or other disposition thereof, to any person receiving the same in good faith and without notice of any lien or other right of the original seller in respect of the goods, shall have the same effect as if the person making the delivery or transfer were a mercantile agent in possession of the goods or documents of title with the consent of the owner".

From the judgment it appears that the contention of the appellant was that section 26 (2) applied to the transaction between Bounvialle as seller, the defendant as buyer in possession with the consent of the seller Bounvialle and the plaintiffs as purchasers under the sub-sale, but in the course of the appellant's argument in this Court it seemed to me to be suggested that the sub-section applied also to the state of affairs exising between the Motor Mart and Bounvialle as buyer and the defendant as sub-purchaser. I am not clear from the appellant's argument, which I found difficult to follow whether he seriously contends this or not but in case he does, I will deal with it.

Now in my opinion, section 26 $(2)$ does not apply to these latter facts because Bounvialle was the hirer and not a purchaser. He had not bought or contracted to buy. He merely had an option to purchase and the option to return the car, while remaining liable for arrears of hire, and therefore on the decision in Helby v. Mathews (1895 A. C. 471) and see Benjamin on Sale at p. 45, he was merely a bailee and could transfer no title. The position might have been different if Bounvialle could be said to have bought or agreed to buy from the Motor Mart. Bounvialle could therefore confer no title. Does however the transaction or series of transactions between Bounvialle and the defendant and plaintiffs come within section 26 (2) of the Ordinance? And this I take to be the serious contention of the appellant from the words of the learned magistrate's judgment. Now there are material words in section 26 (2) namely: "with the consent of the seller". The word "seller" necessarily in my opinion means one who has some legal right to sell either as owner or trustee or agent for the owner or someone with the legal power of sale or authority to sell, not one who purports to sell, and has no title or authority at all. Likewise the words in section $26$ (1): "where a person having sold goods" can in my opinion refer only to one who has some legal right to sell either as owner, trustee, agent for the owner or to someone with a legal power of sale or authority to sell and not to one who purports to sell and who has no authority at all to sell.

Section 26 (2) which must be read in conjunction with section 23 of the Ordinance is designed in my opinion to protect a subpurchaser from a purchaser who is allowed to have possession of goods with the consent of the seller, and is designed to protect honest transactions at least in so far as the transaction between the seller and the first buyer is concerned not to protect a sub-purchaser whose immediate vendor has bought from someone with no title or authority at all.

It would be remarkable if the Legislature protected the true owner by enacting section 23 and then almost immediately afterwards by section 26 nullified that protection by allowing a dishonest person who has no legal right or authority to sell but who calls himself or holds himself out as the owner of goods or as having authority to sell to another, who in turn re-sells, so that the latter acquires a good title.

The sub-sections apply protection in my opinion only to those cases where A. a person with a legal right or authority to sell, sells to B. and allows B. to have possession, and where B. sells to C. In these cases C. is protected in his purchase to the exclusion of A.'s ownership, because A. has allowed B. to have possession, which is some evidence of ownership. The section does not apply where A. has no title himself, even though he purports to act or holds himself out as seller. I think this must be appreciated by a review of the discussions and examples on the sections in Benjamin on Sale and Chitty on Contract.

As I have said Bounvialle was not the owner of the car, the Motor Mart were the owners—Bounvialle was merely a bailee he had not bought or agreed to buy the car from the Motor Mart. Therefore whether you apply section 23 or 26 (2) to Bounvialle the defendant took no title. Nor from the reasons given in the latter part of the judgment was $B$ : a "seller" under the true meaning of section 26 $(2)$ of the Ordinance and the transaction therefore between Bounvialle who purported to sell to the defendant who in turn resold to the plaintiff is not one which falls within the true interpretation of the words in section 26 (2). The plaintiffs are entitled to damages for breach of warranty of title. The appeal is dismissed.

I have given careful consideration to Mr. Khanna's application to vary the usual order as to costs, but I see no reason to vary it and the usual order will be made for the respondents to recover their costs.