Re Goldcorp Exchange Ltd

JurisdictionUK Non-devolved
Judgment Date25 May 1994
Date25 May 1994
CourtPrivy Council
[PRIVY COUNCIL] In re GOLDCORP EXCHANGE LTD. (IN RECEIVERSHIP) [APPEAL FROM THE COURT OF APPEAL OF NEW ZEALAND] 1993 Nov. 22, 23, 24, 25, 29, 30; 1994 May 25 Lord Templeman, Lord Mustill, Lord Lloyd of Berwick and Sir Thomas Eichelbaum

Sale of goods - Property, whether passing - Unascertained goods - Customers purchasing bullion from company on unallocated basis - Company in breach of collateral promise to maintain separate stock of bullion - Whether property in bullion passing to non-allocated claimants - Whether property in subsequently acquired bullion passing to claimants - Whether claimants having beneficial interest in purchase moneys - Whether proprietary restitutionary remedy to be granted - New Zealand - Sale of goods - Property, whether passing - Unascertained goods - Customers purchasing bullion on unallocated basis - Whether acquiring proprietary interest - Sale of Goods Act 1908, s. 18F1 - Estoppel - Equitable - Proprietary estoppel - Company representing customers having title to bullion - Whether company estopped from denying customers' title - Whether estoppel binding on debenture holder - Trusts - Constructive trust - Sale of goods - Transfer of title to purchasers - Company misappropriating purchasers' stock of bullion - Bank appointing receivers of company - Whether purchasers having equitable lien over company's assets - Extent of purchasers' tracing remedies

A company which dealt in gold and other precious metals sold unascertained bullion to the non-allocated claimants for future delivery. The company's brochure provided that it would be responsible for storing and insuring customers' bullion and that physical delivery of gold and silver could be taken on seven days' notice and payment of nominal delivery charges. Each customer received an invoice or certificate verifying his ownership. The company's employees also told customers that the company would maintain a separate and sufficient stock of each type of bullion to meet their demands, but it failed to do so. The second respondent, having initially purchased specific gold maple coins from the company agreed to buy a further 1,000 maples on a non-allocated basis and to store all the coins with the company. The company subsequently acquired a substantial quantity of maple coins but not expressly for him. The third respondent represented a category of claimants who had bought bullion from W. Ltd. whose business was subsequently taken over by the company. There was sufficient ascertainment and appropriation of bullion by W. Ltd. to transfer title to each of them, and thereafter they had a shared interest in the pooled bullion stored separately on their behalf. The company unlawfully misappropriated that bullion by mixing it with its own bullion, removing bullion from the mixed stock, and adding more bullion to it without intending to replace the W. Ltd. claimants' bullion. The company got into difficulties and the Bank of New Zealand appointed receivers under the terms of a debenture issued by the company, whereupon the bank's floating charge over the company's assets crystallised. At that time bullion had not been specifically appropriated to the individual purchase contracts of the non-allocated claimants or the second respondent, and the company's assets, including its bullion, were insufficient to satisfy the bank's secured debt. On application to the High Court of New Zealand by the receivers for directions under section 345(1) of the Companies Act 1955F2 in relation to the disposal of the company's remaining stock of bullion, the judge rejected the claims of the non-allocated claimants and the second respondent to proprietary interests in bullion, but allowed the claims of the W. Ltd. claimants although he held that their proprietary recoveries could not exceed the lowest balance of bullion held by the company between accrual of their rights and commencement of the receivership. The Court of Appeal allowed the appeals of the non-allocated claimants and the second respondent holding that although they had no proprietary rights to the bullion they had retained a beneficial interest in the purchase moneys paid under the contracts of sale which could be traced into the company's general assets in priority to the bank's charge. Although the W. Ltd. claimants had not appealed to the Court of Appeal it enhanced their remedies by declaring that they were to be in the same position with regard to recovery as the non-allocated claimants and the second respondent.

On appeal by the receivers and the bank to the Judicial Committee: —

Held, allowing the appeal, (1) that since the non-allocated claimants and the second respondent had contracted to purchase unascertained generic goods no property in any bullion passed to them in law or in equity immediately upon the making of the purchases by virtue of the contracts because a purchaser could not acquire title until it was known to what goods that title related; and that the collateral promises made in the company's brochures and by its employees did not constitute a declaration of trust by the company in favour of the customers in relation to the company's current stock of bullion of the relevant type so as to immediately transfer title to them in respect of that bullion (post, pp. 208C, D, F, 209H–210B, 223H).

Dublin City Distillery Ltd. v. Doherty [1914] A.C. 823, H.L.(I.) and In re Wait [1927] 1 Ch. 606, C.A. distinguished.

(2) That although the company had by its collateral promises represented to its customers that they had title to bullion held by the company, it was not estopped from denying their title, because there was no fixed and identified bulk in existence from which a title could be created by a deemed appropriation and, moreover, the company had not represented that it was a bailee of bullion which the customers had agreed to purchase; but that, in any event, such estoppel would not be binding on the bank which on crystallisation of its charge had a proprietary interest in the company's assets unaffected by any prior dealing therewith by the company creating indebtedness of a personal nature, and a purchaser with only a pretended title to goods which did not exist could not take priority over a third party creditor with a real title to actual goods (post, pp. 211A–B, H–212B, H–213C, 223H).

Dictum of Brett L.J. in Simm v. Anglo-American Telegraph Co. (1879) 5 Q.B.D. 188, 206–207, C.A. applied.

Knights v. Wiffen (1870) L.R. 5 Q.B. 660 distinguished.

(3) That the non-allocated claimants and the second respondent had no proprietary interest in bullion acquired by the company after their contracts of sale had been made since it was impossible to know to which, if any, of their contracts a particular acquisition by the company related, nor had the company purchased coins expressly for the second respondent and appropriated them to his contract; that the collateral promises did not impose on the after-acquired bullion a trust because no separate and sufficient stock of bullion to meet the customers' requirements actually existed, nor had the company been constituted a bailee by the contracts of sale and the collateral promises since it could not be said that whenever the company obtained bullion of a particular description purchasers of the relevant kind of bullion acquired either title or a higher possessory right than the company itself; that, although the existence of a contract did not necessarily preclude one party from owing fiduciary duties to the other, a fiduciary relationship created obligations different in character from those under the contract, and the company was under no obligations other than its contractual ones; but that, in any event, since the company had not established a separate and sufficient stock of bullion, there was nothing to which any proprietary interest could be related, nor could it be attached to the company's remaining stock of bullion or other assets; that despite the company's failure to fulfil its contractual obligations, since it was not required by any express or implied contractual term to set aside all the bullion which it had purchased for the fulfilment of unallocated sale contracts, it had not acted wrongfully in acquiring, maintaining and using its own stock of bullion; and that, therefore, since the company's stock of bullion had no connection with the purchases by the non-allocated claimants and the second respondent, it would be wrong to declare in their favour a remedial constructive trust, or a restitutionary proprietary interest, over it (post, pp. 214A, C, 215A–B, C–E, F, G–H, 216D–F, G–217A, B, D–E, F–G, 224C–D).

In re London Wine Co. (Shippers) Ltd. [1986] P.C.C. 121 and Mac-Jordan Construction Ltd. v. Brookmount Erostin Ltd. [1992] B.C.L.C. 350, C.A. applied.

Holroyd v. Marshall (1862) 10 H.L.Cas. 191, H.L.(E.) distinguished.

(4) That as each customer had paid the purchase price solely in order to perform his part of the agreement under which he would eventually be entitled to delivery of bullion, and there was no express or implied provision preventing the company from spending the purchase moneys as it wished or requiring it to use that money to purchase and maintain a separate stock of bullion for the customers, the purchase moneys were not impressed from the outset with a trust in their favour thereby entitling them to trace the moneys into the company's assets, nor was the company a fiduciary as regards the purchase moneys; that since the customers had never rescinded the contracts of sale it was too late for them to contend that the transactions were rendered ineffectual by misrepresentation, mistake or total failure of consideration thus entitling them to a proprietary interest in the purchase moneys or fruits thereof in priority to the bank's interest; that even if the company had misled the customers into buying bullion by misrepresenting that in accordance with its collateral promises it intended to establish...

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