Case No: 5862/07
Neutral Citation Number: [2008] EWHC 2205 (Ch)
In the High Court of Justice
Chancery Division
Companies Court
Royal Courts of Justice
Strand, London, WC2A 2LL

Date: 29th April 2008
Before:
N. Strauss Q.C.
Deputy judge Ch. D.

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Between :

	In the administration of BA Peters plc (in administration)
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In the matter of the Insolvency Act 1986 

Jane Bronwen Moriarty
Myles Antony Halley
(the administrators of BA Peters plc) (in administration)	

Applicants	
	and		
	Various customers of BA Peters plc (in administration)	Respondents	

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Miss Lexa Hilliard, instructed by Messrs Pinsent Masons, appeared for the applicants.
Mr. Sharif Shivji, instructed by Messrs Howell Jones LLP, appeared for Mr. and  Mrs. Head.
Mr. Christopher Aylwin, instructed by Messrs Lyons Davidson, appeared for Mr. and Mrs. Atkinson and Mr. Clarke.
Mr. Julian Allsop, instructed by Messrs Wragge & Son Co., appeared for Mr. Staples and Berton Waters Marina Limited.
Mr. Hugo Groves, instructed by Messrs Harrowell Shaftoe, appeared for Mr. and Mrs. Smith.
Mr. Tiran Nersessian, instructed by Messrs Harrowell Shaftoe, submitted skeleton arguments
on behalf of Mr. Anderson and Mr. Gater.

Hearing dates : 12th – 14th March 2008
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JUDGMENT
Judgment
Background facts
1.	Until it went into administration on 14th August 2007, BA Peters plc (“the Company”) sold boats both on its own account and as brokers for its clients, carried on chandlery operations and provided shipyard services and port to port transportation.  Its business was operated from eight sites in the United Kingdom.  This is an application by its joint administrators, who are licensed insolvency practitioners and partners in KPMG LLP, for directions relating principally to money held in a client’s account and to boats which were the subject of transactions which had not yet been completed by 14th August 2007.  
2.	The issues with which I am concerned have arisen from two kinds of sale conducted by the Company.  First, the Company sold boats to its customers as principal.  In some cases these were boats which the customers ordered to their own specification, and which the Company ordered from the manufacturers.  In other cases, the boats were standard models which were purchased by the Company in accordance with one of the distribution agreements which it had with different manufacturers.  Frequently, there were extras to be fitted either by the manufacturer or by the Company or by both.  
3.	Normally, a payment schedule was agreed between the Company and the purchaser at the time of the sales contract, with an initial payment, further instalments and a final payment of the balance due.  Sometimes the customer provided his existing vessel in part exchange and the agreed value was treated as part payment.  
4.	These direct sales were normally subject to standard terms, partly contained in a Sale and Purchase Agreement for a New Vessel which set out the basic details of the contract, including the date, contract number, parties, total purchase price, payment schedule and details of the vessel and the anticipated completion and handover dates.  In addition, there was an Appendix to Terms of Agreement, containing special terms agreed with the customer and there were also printed Terms and Conditions.  One provision of the Terms and Conditions is important.  Clause 8.1.1 provided that ownership should not pass to the customer “until the Company has received in full all sums due to it in respect of .. the Goods and .. all other sums which are or which become due to the Company from the Customer on any account”.  There was no provision for part payments to be held on a separate account, but some customers have said that promises to that effect were made separately, and their statements are accepted as correct by the applicants.
5.	According to a transaction schedule prepared by Miss Hilliard, which summarises the evidence relating to each relevant transaction, there are signed contracts for 7 of the 11 direct sales on the schedule.  In 4 cases the contract appears to be unsigned and in one case no written contract has been found.  In some cases the vessel was mortgaged to Lombard North Central plc under a stocking facility.
6.	The second group of transactions with which this application is concerned are brokerage sales, in which the Company, acting as broker, sold vessels for its customers.  The Company had standard terms and conditions relating to its brokerage business, which provided (inter alia) that the Company was to hold any deposit in the client account, but there is no evidence that these terms were actually agreed, except in 2 out of the 22 brokerage sales with which this application is concerned.
7.	In many cases, however, the evidence does include copies of an Agreement for the Sale and Purchase of a Second Hand Vessel between the vendor and the purchaser of the vessel, which expressly provides that the purchaser should pay a 10% deposit to the Company as stakeholder. This occurs sufficiently often to suggest that such agreements were routinely entered into. It seems likely that, even in the cases in which there is no copy of such an agreement, one was signed by the parties but did not find its way into the files of the Company.
8.	As from 2003 (and possibly earlier) the Company’s banker was Barclays Bank.  The Company operated on an overdraft secured (inter alia) by certain fixed assets, and at the material time its overdraft limit was £5.5 million.  In addition to its current account no. 90704229, there was a client account no. 20564206.  The Company normally paid deposits and part payments on direct sales into the current account, but its policy was to pay deposits received on brokerage contracts into the client account.  However, until early June 2007, the client account was “swept” every week, with an automated transfer of all funds in the client account in excess of £10,000 to the current account.  The Company’s overdraft position was calculated by reference to the net amount due after taking into account the credit on the client account. The effect of this practice was that deposits paid into the client account did not necessarily remain there.
9.	Automated transfers stopped in June 2007. It is not clear whether this was at the instigation of the directors or of Barclays Bank’s Business Support Team, which had been brought in by the local branch in Reading in 2005, when the Company had failed to meet budgetary and financial projections and appeared to have liquidity problems.  Whoever instigated the change, the last sweep of the client account took place on 5th June 2007.  
10.	From then on, according to the evidence of one of the directors, Mr. Savage, the policy was to pay all deposits, whether for direct or brokerage sales, into the client account, in view of the Company’s uncertain financial position.  However, whilst this was usually done for brokerage sales, it did not always happen when payments were made on credit or debit cards and it does not appear to have been done except in a few cases on direct sales, on occasions despite the customer having been promised that the money would be paid into a separate account.  
11.	In the period between June and August 2007, there were four transfers from the client account to the current account, instigated by the Company, which represented commission due to the Company or profit on direct sales on completed contracts.  The dates and amounts were £139,898.49 on 29th June 2007, £108,798.26 on 6th July 2007, £26,814.25 on 25th July 2007 and £41,975.28 on 2nd August 2007.  Not surprisingly, in view of its financial position, the Company seems to have been keen to have the benefit of the profits it had made.
12.	By the end of July 2007, the Company was in dire straits, and KPMG was brought in advise whether a distressed merger or acquisition was possible.  By 9th August 2007, it was appreciated that the Company had failed to pay deposits provided by a number of customers into the client account, and instructions were given (there is a conflict of evidence as to who gave them, but it does not matter) to the Company’s cashier, Miss Brooks, to calculate the amount deposited, and to transfer the total amount from the current account to the client account, less commission held in the client account in respect of completed transactions.  
13.	Miss Brooks listed amounts totalling £326,360, deposited in connection with a total of 14 sales, from which she deducted £33,555.04 in respect of commission due to the Company on other transactions which had been completed.  She telephoned Barclays Bank to give instructions for the transfer of the balance of £292,805.96 which, according to her evidence, the Bank refused to implement.  However the more detailed evidence available from Barclays Bank shows that the transfer was in fact made, but was then reversed.  Nobody at Barclays Bank has any recollection of the transaction, but the evidence of Mr. Fry, of the Business Support Team, is to the effect that the reason must have been that the transfer would have resulted in the overdraft limit being exceeded and that the reversal of the transfer in such circumstances would have been standard bank practice.
14.	In fact, although there is no evidence that anybody was aware of this at the time, there was by 9th August 2007 a surplus of £32,538.98 in excess of the amounts held for the customers whose deposits had been paid into the client account.  The result of the reversal of the transfer was that the amount in the client account which was in excess of the deposits held for such customers was, by the end of the day on 9th August, again £32,538.98.  Subsequently it was increased by £7,500 in connection with a vessel called “Park Gate” and by £85,300 in connection with a vessel called “Cularan”.  There is no evidence as to the circumstances surrounding “Park Gate”, but the second transfer related to a completed sale on which the Company paid out the amount deposited of £85,300 from another account; this amount is therefore due to the Company.
15.	Then, after the commencement of the administration, in October 2007, the amount in the client account was further increased by £182,760.17 which was transferred from various Euro accounts.  I set out the evidence of Mr. Fry about this in full:-
“16.	I am aware that in October 2007 following the appointment of the Administrators, the Bank sought to rationalise the number of ‘live accounts’ held in the name of BA Peters by netting down into sterling any monies held on B A Peters currency accounts and transferring some of the credit balances on those accounts into the B A Peters main accounts which were now under the control of the Bank’s Corporate Insolvency Team.

17.	There were 6 accounts, 5 of which were Euro accounts and one of which was a dollar account being:

55415266 - USD B A Peters
88670999 - B A Peters Opal Account
54053733 - B A Peters Seaport a/c (Client account)
63822322 - BA Peters (Client account)
68912955 - B A Peters Superyachts a/c (Client account)
45276899 - B A Peters (Client account)

18.	I understand from the Bank’s solicitors that they have spoken to Diane Moloney who is the Corporate Insolvency Assistant Manager within the Bank’s Corporate Insolvency team in Leeds and she has explained the balances and transfers in relation to each of these accounts.

…

54053733 B A Peters Seaport a/c (Client account)

21.	On 5 October 2007, the Bank transferred the balance of Euro 2,045.25 (£1,415.01) from this account to the Client Account. …

63822322 BA Peters (Client account)

22.	On 5 October 2007, the Bank transferred the balance of Euro 953.14 (£659.43) from this account to the Client Account. …

68912955 B A Peters Superyachts a/c (Client account)

23.	On 5 October 2007, the Bank transferred the balance of Euro 135.25 (£93.57) from this account to the Client Account. …

45276899 B A Peters (Client account)

24.	Initially, on 5 October 2007 the Bank transferred the balance of Euro 261,027.91 (£180,592.16) from this account to the Current Account but a subsequent transfer was then made of the balance to Client Account on 12 October 2007. 

…

26.	I understand that the above transfers were each made on the instructions of Mr. Armour [of the Business Support Team].  I am informed by Mr. Armour that the two transfers into the Current Account reduced the Current Account overdraft. The other euro accounts monies were transferred into the Client Account as the accounts are described as “client accounts”.

27.	I am now informed by the Administrators that the monies on the euro accounts were not monies in relation to incomplete transactions which are the subject matter of the Administrators’ application and should not have been paid into the Client Account as the funds were in relation to non-customer trade transactions with B A Peters where euros were used. I had no knowledge of any non-customer related trade transactions in relation to either account. However to the extent that the monies should not have  been transferred into the Client Account as the Administrators now contend, the Bank will comply with any direction given by the Court. As the monies have now been mixed with the monies in the Client Account, which are the subject of the Administrators’ application to Court, the Bank has been advised that it should leave the monies in the Client Account pending the final determination of the application.”

16.	The total amount in the client account is £956,265.62, which represents amounts deposited by various customers and the following additional amounts:- 
£32,598.98 representing the excess accumulated by 9th August 2007.
£7,500 in connection with “Park Gate”.
£85,300 in connection with “Cularan”.
£182,760.17 from the Euro accounts.

17.	For the reasons set out later in this judgment, most of the money deposited by customers is held on trust either for them or for the other party to a brokerage sale, but for various reasons some of it is not or may not be: see paragraphs 25, 36, 37 and 93-5 below.
Basic principles of law
18.	There has been no issue between the parties as to the basic principles of law, and I accept the following propositions advanced by Miss Hilliard:-
(a)	The creation of a trust requires certainty of intention, certainty of objects and certainty of subject matter.  Certainty of intention refers to the intention of the settlor: it is not necessary that the beneficiaries should even be aware of the trust.  
(b)	Where parties have agreed that money will be paid into a separate account and will be held on trust, a trust is created.  Even where the parties have not expressly agreed that money should be held on trust, a trust is created if the settlor pays money into a separate account for the benefit of specific third parties: see re Lewis’s of Leicester Limited [1995] 1 B.C.L.C. 428, in which the company had caused money to be paid into a separate account for the benefit of specific creditors without their knowledge.  
(c)	However, the claim to beneficial ownership of money in a bank account requires the continued existence of the money either as a separate fund, or as part of a mixed fund, or as latent in property acquired by means of such fund.  Where money is paid into a bank account, which then becomes overdrawn, the fund ceases to exist.  Equitable tracing therefore cannot be pursued through an overdrawn account, and the beneficiary cannot claim a proprietary interest in other assets belonging to the trustee in priority to other unsecured creditors on the ground that his assets had been misappropriated in breach of trust: see Bishopsgate Investment Limited v. Homan [1995] Ch. 211 per Dillon L.J. 216d-f and 218e-220-h.
(d)	Tracing is only possible to the extent that the balance ultimately standing to the credit of the trustee in the bank account does not exceed the lowest balance of the account during the period since the money was paid into the account: James Roscoe (Bolton) Limited v. Winder [1915] 1 Ch. 62.  
(e)	Payments into a general account cannot without proof of express intention be appropriated to the replacement of trust money which has been improperly mixed with that account and drawn out; James Roscoe (Bolton) Limited v. Winder at 69.
Money paid into client account
19.	In the case of most brokerage sales and also some direct sales, money was paid into the client account.  This applies to all brokerage sales, except for those identified at paragraph 40 of Miss Hilliard’s skeleton argument, and to the payments by direct sales customers identified at paragraph 38 of her skeleton argument (including Mr. and Mrs. Smith for whom Mr. Groves appeared).  The administrators have established that the credit balance in the client account at all material times exceeded the amounts held in respect of brokerage sales and direct sales customers.  It follows that the relevant amounts are held on trust on behalf of the relevant direct sales customers and as stakeholders in the brokerage sales.
Issues arising in brokerage sales
20.	The question arises in some of the brokerage sales whether the money held by the Company as stakeholder is held for the buyer or the seller. It arises in relation to 6 sales in which there is a copy of the written agreement in the file, namely the sales of “Achates”, “Call Girl”, “Grumpy Bear”, “Otter”, “Tringa” and Ynys Hwyl”, and in 3 sales for which there is no extant written agreement, namely “Phantasy”, “Tap Dancer” and “Tereina”. In the cases in which there is a copy of the written agreement on the file, its terms provide that the Company holds the money as stakeholder. In the cases in which there is no written agreement on the file, I think that it is more likely than not that a written agreement was concluded, but in any event it is clear from the evidence of Mr. Savage that the Company held the deposit on behalf of the purchaser pending completion of the sale, which amounts to the same thing.
21.	In all these cases, so far as the administrators are aware, nothing has been done to complete the sale and (except in one case), despite extensive correspondence and joinder of both buyer and seller as parties, it is not clear whether the property of the vessel has passed to the purchaser or whether either or both parties wish the sale to proceed. 
22.	Miss Hilliard submitted that, in view of the long delay in completing these agreements, and the apparent silence of one or both parties, the correct inference is that they have agreed to rescind the sales, in effect by abandoning them. She referred me to the decision of the Divisional Court to that effect in Pearl Mill Co. Ltd. v. Ivy Tannery Co. Ltd.[1919] 1 K.B. 78. However in that case the delay was considerably longer and the circumstances were quite different. In the present case, it is at least possible that the parties, who have received lengthy correspondence and detailed documentation relating to these applications, to which they are respondents, have found their complexity too daunting and are simply awaiting the decision of the court.  I am not quite persuaded that I would be justified in inferring that the parties to these agreements do not intend to complete the sales.
23.	Miss Hilliard made the point that taking further steps to ascertain the position of the parties to these sales would increase the costs of the administration, but that is not a reason for reaching a factual conclusion which I do not think is warranted on the basis of the existing evidence, except in the case of ‘Tereina’.  It is obviously undesirable that the Company should incur unnecessary expenditure in ascertaining what the position of the parties to these transactions is, but I think that it would be relatively simple to deal with the matter in correspondence.
24.	In the case of ‘Tereina’, the position is that the purchaser has made it clear that he does not wish to proceed and has asked for repayment of his deposit of £800; the administrators have no address for the seller, but it can fairly be inferred from the purchaser’s letter that the seller has taken no steps to complete the purchase. It is unlikely that the seller is awaiting the outcome of this application, as he will not have received the correspondence relating to it. I therefore find that the parties have rescinded this sale and direct that the £800 be paid to the purchaser, Mr. Elliott.
25.	In the case of ‘Midnight Drifter’, it is not clear whether any further steps need to be taken. The schedule shows that the £2,300 deposit is held in the client account, but the purchaser says that he was able to cancel his cheque for the deposit. If this is right, there is nothing more for the administrators to do.
26.	In the other cases, what I would suggest (and I will if necessary make formal directions) is that the administrators should write to the parties to these transactions, with a stamped addressed envelope for a reply, referring to the outstanding uncompleted sales, and to the previous correspondence relating to the application, and then continuing along the following lines:-
“The Court has taken the view that the delay in completing the sales may indicate that both parties have decided not to proceed with it, in which case the deposit of £………… would be repayable to [the purchaser]. 

However, the Court has directed that we should write to both parties to ask them to confirm their intentions, and we should be grateful if you would indicate below what your intention is. 

The Court has indicated that, if no response is received from either party within 28 days, it is likely to take the view that the parties do not intend to proceed with the transaction and to direct that the deposit be returned to [the purchaser].”

27.	Then I would suggest that, at the foot of the letter, there should be two options for the parties to tick. 
“•	I confirm that I do not intend to complete the sale of [vessel] and that the amount of £………… should be paid to [purchaser].

•	I do wish to complete the sale of [vessel]. Brief details of the proposed arrangements for completion are set out below.

…”

28.	This should produce a definite answer at least in some of the above cases, and in others I will probably be able to give further directions on the basis of written submissions from the administrators: I will only require a hearing if it seems necessary.
29.	In other brokerage sales, the whole of the purchase price was paid by the purchaser. In some cases (including “Cloud Nine” purchased by Mr. Gater and “Cularan”), no directions (except for a point on commission of which I may be reminded) are needed. Issues have however arisen in relation to other such sales. 
30.	In the case of “Moonshadow”, Mr. Anderson paid the full amount of £40,000 for the vessel, but the seller, Mr. Campbell, had sold it to a third party. The sales contract is governed by Scots law, but there is no evidence that Scots law differs from English law, and on the basis of English law Mr. Anderson is clearly entitled to the repayment of his money, which is held by the Company as stakeholder in the client account.
31.	In the case of “Jakinda”, it has been agreed between the sellers, J. Hurst and L.A. Carter-Hurst and the purchaser, Mr. Stead, that the sale has been completed and that the administrators can pay the sum of £8,200 held as stakeholder on the client account to the sellers. No commission is payable, because the sale was not completed through the agency of the Company as broker.
32.	In the case of “Lulu Too”, there is clear evidence that the purchaser, Mr. Physick, had paid the full price of £22,800 by 31st July 2007, and the money is held in the client account. Despite this, the vendor, Ms. Eyles, apparently has the keys and possibly some title documents relating to the boat, and is continuing to insure it. Ms. Eyles was made a respondent to the application but has not provided any evidence. The position appears to be clear, and I propose to grant a declaration that Mr. Physick is the owner of the vessel and entitled to possession of it, and to make orders requiring Ms. Eyles to hand over the keys and any documents relating to the vessel in her possession and to execute a bill of sale in accordance with clause 7(i)(a) of the agreement, and for the amount in the client account less commission to be paid out to her.
33.	In the case of “Serena”, the administrators understand that the purchaser has taken possession of the boat. If they are able to confirm this, the amount of £9,000 in the client account, less commission and other costs totalling £1,040.50 which is due to the Company, can be paid to the seller.
34.	In the case of “Flying Pyjamas”, the purchaser has taken possession of the boat and the seller claims the purchase price. The seller is entitled to £25,818.50 after deductions. However, the purchaser’s deposit of £3,500 was paid into the client account, and only £27,900 is in the client account, to which the seller, Mr. O’Flynn, is entitled.
35.	In the case of “Redwood”, the seller is more fortunate. All the money paid by the purchaser went into the client account, and after deductions of £2,185.50 due to the Company, the balance of £28,814.50 is due to him.
36.	In the case of “Tirren Lady”, again all the money paid by the seller is in the client account, but the Company apparently refunded £1,000 to the purchaser for post-survey work without authority. Miss Hilliard suggests, and I agree, that this should be taken from the commission otherwise due to the Company. The result is that the seller is entitled to £77,000, less commission on £77,000 and VAT, plus £1,000.
Money paid into the current account
37.	As indicated earlier, most of the money paid on account in direct sales was paid into the current account, in some cases despite an express promise to the contrary, and some money was paid into a current account in relation to brokerage sales.  Miss Hilliard submits that where this has happened, whether or not a breach of trust was involved, the customer cannot trace his money through an overdrawn current account: see Bishopsgate Investment above.  Whilst the Company tried to put matters right on 9th August 2007, at least for some customers, its attempt to do so failed, and it follows that all these customers have no proprietary claim and are unsecured creditors.  
38.	Mr. Aylwin appears for two couples who are in this position, Mr. and Mrs. Atkinson and Mr. and Mrs. Clarke.  
39.	Mr. and Mrs. Atkinson agreed to buy a Bavaria 34 from the Company on 25th June 2007, having previously paid a deposit of £2,000.  Between 25th and 29th June 2007, the Company received sums totalling £97,500 from the sale of Mr. and Mrs. Atkinson’s boat “Gemini”, which the company had sold on their behalf to a Mr. Rhodes, who paid part of the purchase price with finance provided by Lombard.  Out of the £97,500, £17,500 was paid into the client’s account, of which £7,219 was paid out to Mr. and Mrs. Atkinson and £2,459 was paid to the Company for commission on the sale of Gemini, leaving £7,822 remaining in the client account.  This left £81,000 due to Mr. and Mrs. Atkinson from the Company, which should have been held on trust in the client account but was not: this amount was part of the £292.805.96 which the Company attempted to transfer to the client account on 9th August 2007.  
40.	Mr. and Mrs. Clarke agreed to buy a Bavaria 31 and were also told that any part payments would be held in the client account: however, the amounts which they paid totalling £27,732 were paid into the current account.  Like Mr. and Mrs. Atkinson, Mr. and Mrs. Clarke were on the list of customers referred to for the transfer to the client account on 9th August.
41.	Mr. Aylwin, while accepting the proposition that money cannot be traced through an overdrawn account, submitted that his clients nevertheless have a proprietary interest in the money now held in the client account.  He accepted that others on Miss Brooks’ list would have a similar interest and that, if the money was insufficient to satisfy all, it would have to be shared rateably.  He put his case in three ways:-
(1)	The Company intended to create a trust in favour of the listed customers over whatever was held in the client’s account in addition to the money already held for other customers.
(2)	Customers whose money had, in breach of trust, not been paid into the client account had a right to impound any surplus money not otherwise held for clients which was found on that account.
(3)	The Bank’s reversal of the credit to the account on 9th August was invalid because, once the transfer was effected, the money was to the Bank’s knowledge held on trust for the clients.
42.	Mr. Aylwin’s first argument was directed mainly at the sums totalling £182,760.17 transferred from the euro accounts into the client account in October 2007, by which time the Company was in administration.  He submitted that the transfers must have been effected by the Bank on the instructions of the Company and that, in the absence of any evidence to the contrary, it was to be presumed that the intention was to transfer the money into the client account for the benefit of clients whose money had previously, in breach of trust, been misapplied.  Therefore, this was a case in which, unlike the position in James Roscoe (Bolton) Limited v. Winder, the Company had put money in a separate account with the intention of replenishing the trust fund.
43.	I am unable to accept this submission.  It is clear from the evidence of Mr. Fry, which is set out above, that the decision to transfer the amounts on the euro client account into the sterling client account was part of a tightening up exercise carried out by the Bank on its own initiative.  Neither the administrators nor the directors had any intention at all in relation to the transfers, let alone the intention belatedly to comply with the Company’s obligation to place monies held for these clients in a separate account, which is the intention which the Company would have had to have in order to create a trust. 
44.	Mr. Aylwin submitted that, if I took this view of the evidence, I should adjourn the application in order to enable him to make an application for disclosure of any documents relating to these transfers, with a view to ascertaining whether in fact the Company was involved in the decision to make them and if so with what intention. However, it does not seem likely, in view of Mr. Fry’s evidence, that a different picture would emerge and in any event I do not consider that the delay and expense involved in an adjournment is justified.  Such an application could have been, but was not, made before the hearing.  
45.	I have also considered whether there was an intention to create a trust in relation to the surplus amount of £32,538.98 standing to the credit of the client account on 9th August 2007, but it is impossible so to find.  It is clear from the evidence that the Company was not aware that this amount was available, otherwise Miss Brooks’ instructions would have been to deduct it from the amount to be transferred from the current account, so as to leave the correct balance held on trust.  The most that might be said is that, if the Company had been aware that there was such a surplus in the client account, in excess of the amount held on trust for customers other than the listed ones, it would have allocated it to the listed customers.  But this is not sufficient: what is required to create a trust is an actual intention to create one.  No such intention was formed, either before the attempted transfer of £182,760.17 or afterwards, when it failed.  At both points in time the Company believed that what was in the account was the amount held on trust for customers other than the listed ones and no more.
46.	In relation to both the amount of £182,750.17 transferred from the euro accounts and to the surplus amount of £32,538.98, I have considered the relevant passage in the judgment of Sargant J. in James Roscoe (Bolton) Limited v. Winder at 69:-
“Then, apart from tracing, it seems to me possible to establish this claim against the ultimate balance of 958l. 5s. 5d. only by saying that something was done, with regard to the additional moneys which are needed to make up that balance, by the person to whom those moneys belonged, the debtor, to substitute those moneys for the purpose of, or to impose upon those moneys a trust equivalent to, the trust which rested on the previous balance.  Of course, if there was anything like a separate trust account, the payment of the further moneys into that account would, in itself, have been quite a sufficient indication of the intention of the debtor to substitute those additional moneys for the original trust moneys, and accordingly to impose, by way of substitution, the old trusts upon those additional moneys.  But, in a case where the account into which the moneys are paid is the general trading account of the debtor on which he has been accustomed to draw both in the ordinary course and in breach of trust when there were trust funds standing to the credit of that account which were convenient for that purpose, I think it is impossible to attribute to him that by the mere payment into the account of further moneys, which to a large extent he subsequently used for purposes of his own, he intended to clothe those moneys with a trust in favour of the plaintiffs.” (my emphasis).

47.	In the present case, the payments under consideration were not, as in James Roscoe, paid into a general trading account, but were paid into a separate account which had been set up to hold monies on trust.  Nevertheless, I do not think that Sargant J. was saying that the payment of further monies into such an account necessarily indicated an intention on the part of the debtor to create a trust to replace money taken earlier in breach of trust.  In my view, he was saying at most that this would be presumed in the absence of evidence to the contrary.  In the present case, for the reasons set out above, it is clear from the evidence that there was no such intention in relation to any of the money in question.
48.	Mr. Aylwin’s second argument that his clients had a right to impound the money now in the client account, if correct, would apply to both the amounts of £182,750.17 and the amount of £32,538.98, and also to other amounts not due to clients, such as those referred to at paragraphs 25, 36 and 37 above. In support of this argument, Mr. Aylwin referred me to Snell’s Equity 31st edition §28-17, which states as follows:-
“If a trustee who has been guilty of a breach of trust has any beneficial interest under the trust instrument, he will not be allowed to receive any part of the trust fund in which he is equitably interested until he has made good the breach of trust.  The principle is that to the extent to which he is in default he is regarded as having already received his share. The rule applies not only to beneficial interests given to him directly by the trust instrument, but also to interests acquired derivatively, e.g. by purchase from another beneficiary or as his next-of-kin.  The beneficial interest which he claims under the instrument imposing the trust is treated as being subject to an implied condition of the proper performance of his duties as trustee.”

49.	Mr. Aylwin also relied on the decision of the Court of Appeal in re Dacre [1916] Ch. 344, in which a testator had had by his will appointed Mr. Dacre to be one of his executors and trustees and would also give a legacy to Mrs. Dacre.  She died without having received the legacy, bequeathing all her property to her husband, who then died insolvent without having proved his wife’s will.  He had also misappropriated £1,500 from the estate of the testator.  It was held that the remaining trustee and executor of the testator’s will was entitled to retain the legacy as against Mr. Dacre’s heirs to cover his defaults.  The principle was stated by Lord Cozens-Hardy M.R. at 346-7 in the following terms:-
“It has been settled by a long series of authorities, which are binding upon us, that a defaulting trustee cannot claim a share in the estate unless and until he has made good his default, and the true principle…[was] emphatically affirmed by Parker J.  In re Tunndrow [1911] 1 Ch. 662, 666, 668 where during the course of the argument he said this: “the real principle is that where there is an aggregate fund in which the trustee is beneficially interested into which he owes something, he must be taken to have paid himself that amount on account of his share…the theory on which that rule is based is that the Court treated the trustee as having received his share by anticipation, and the answer to any claim made by the trustee is this: ‘you have already received your share; you have it in your own hands’”.

50.	Again, I am unable to accept this argument.  As Miss Hilliard points out, there is no trust fund for the beneficiaries to impound.  The money belonging to the customers on the list was lost in the current account, and none of the money now in the client account ever formed part of trust fund belonging to any of those customers.  There is therefore nothing for Mr. and Mrs. Atkinson or Mr. and Mrs. Clarke to impound. The effect of the argument would be to create a new class of preferential creditors, namely those whose money was taken by the Company in breach of trust; this would be inconsistent with Bishopsgate.
51.	Mr. Aylwin’s third submission is that the Bank was not entitled to reverse the credit to the client account on 8th August 2007, since it was aware that any money in the client account belonged to the Company’s customers and not to the Company.  This may be so, but it is not a point which I could decide without the Bank having been joined as a party to the application.  Mr. Aylwin said that he put forward this argument to establish a set off against the Bank’s claim to the money transferred from the euro accounts in October 2007.  I do not read Mr. Fry’s witness statement as asserting a claim to that money, but even if I am wrong the Bank would have to be joined as a party.
52.	It would be open to the Company to make a claim against the Bank if so advised, and if such a claim succeeded and the amount of £292,805.96 was paid back to the client account, then the listed customers (other than Mr. and Mrs. Head, for reasons which appear later) would be entitled to claim it; there is clear evidence that the Company intended to place the money in the client account to be held as trustee for them.  However, for the present, Mr. and Mrs Atkinson and Mr. and Mrs. Clarke, and others in their position, must unfortunately remain as unsecured creditors.
Mr. and Mrs. Head
53.	Mr. and Mrs. Head contracted on 22nd May 2007 to purchase a Bavaria 31 no. 270616 for a total price of £62,424, shown in the Schedule to be made up of the purchase price to standard specification of £46,766, delivery and commissioning charges of £4,027, factory fitted extras totalling £474 and dealer fitted extras totalling £7,763.18, all less 10% discount and plus VAT.  
54.	Clause 5.1 of the standard Terms and Conditions provided that payment was to be made in accordance with the payment schedule.  Clause 5.2 provided that payment was to be made without deduction whether by way of set-off, counterclaim, discount, abatement or otherwise unless the customer had a valid court order requiring an amount equal to the deduction to be paid by the Company.  Clause 8.1.1 provided that ownership should not pass to the customer until the Company had received in full all sums due to it in respect of the Goods (i.e. the vessel) and all other sums which are or which become due to the Company on any account.  
55.	There was also an Appendix to Terms of Agreement, clause 1 of which provided for the sale and purchase of the vessel and equipment as defined in the Schedule (in other words, the boat and the factory fitted and dealer fitted extras).  Clause 7.2 provided that the boat should be made available to the Company for viewing and demonstration purposes for 12 months from handover at its fully insured risk and that during this period the Company should supply a berth at the Gosport Marina at its expense [H3/9/3A].  According to Mr. Head’s witness statement, the period was for two years, but the terms of the Appendix refer to a period of one year (H8/635).  It is possible that there is a handwritten amendment which reconciles the difference, but it is too faint to be sure.  Nothing turns on this inconsistency.  
56.	By 14th August 2007, Mr. and Mrs. Head had paid 90% of the purchase price, that is all but the last £6,242.40.  They do not say that there was any promise to put this money in a client account, but in fact they are shown on Miss Brooks’ list for the purposes of the abortive transfer to the client account in the sum of £50,992.  Part of the difference between the amount they had paid, £56,182, and this amount is accounted for by commission of £2,232.50 payable to the Company on the sale of their vessel “Lady H”.  I do not know what the explanation is for the remaining difference, but again nothing turns on it.
57.	The vessel was due to be handed over in early August, but Tom Edgington of the Company telephoned them to say that it was not ready, and eventually they were told that it would definitely be ready by 17th August.  However, the administration supervened and Mr. Head was told, without explanation, that he could not take the boat.  On 21st August 2007, he received an email from C&J Marine Limited, telling him that they had boarded the boat and removed certain dealer fitted items for which the Company had not paid.  Subsequently, Mr. Head went on board the boat with a representative of the administrators and took a copy of the work schedule, from which he was able to ascertain what work had not been done.  This includes the items recovered by C&J Marine totalling £2,117.85 in value, other factory fitted and dealer fitted items totalling £3,586 in value, commissioning valued by Mr. Head at £1,400, plus VAT on all these, and two years mooring at Gosport including VAT, valued by Mr. Head at £9,000.  The price of the missing factory fitted and dealer fitted items, including VAT, is £6,702.02.  This exceeds the unpaid balance on the total contract price, which is £6,242.40.  
58.	Mr. Shivji’s principal submission was short, straightforward and in my view right. He submitted that, since it is now clear that the Company has not supplied and will not supply the factory fitted and dealer fitted extras, and since the price payable for these extras exceeds the balance which would otherwise be due, Mr. and Mrs. Head have paid all the money that is due and owing to the Company.  Therefore, the property in the boat has passed to them by virtue of clause 8.1.1 and they are entitled to a declaration to that effect.  Since the boat is in the possession of third parties, this should be sufficient to secure Mr. and Mrs. Head’s position without the need for an order for delivery up.
59.	Miss Hilliard submitted, relying in particular on clause 1 of the Appendix, that this was an entire contract, and that the balance of the purchase price remained due, notwithstanding non-delivery of the extras.  She submitted that, whilst Mr. and Mrs. Head would be entitled to set-off that part of the price which is attributable to the undelivered extras, the effect of clause 5.1.2 of the Terms and Conditions (if valid, which she very fairly conceded was debatable) was that the whole purchase price remained due unless and until there was a valid court order.
60.	I do not accept this submission for a number of reasons.  First, I do not think that this is an entire contract.  It is not expressed to be one. On the contrary, different parts of the consideration are expressed to be due in respect of different parts of what was to be supplied. The argument can be tested in this way.  Suppose that the Company had remained solvent, but that the manufacturers of one of the extras had ceased to produce it, so that it could no longer be supplied.  Would the purchaser then be able to refuse to accept delivery on the ground that the Company could not fulfil the whole of what was on the proper construction of the contract an indivisible obligation?  In my view clearly not.  Such a conclusion would be wholly uncommercial, and not one which could be reached in the absence of clear words.   Equally, in that situation, I can see no reason for saying that on the proper construction of the contract the whole amount, including the amount for the unavailable item, would remain due.  I do not think that the purchaser’s entitlement to refuse to pay for the undelivered item depends upon set-off or abatement: the money is simply not due.  Therefore clause 5.1.2 is not engaged.
61.	Secondly, a term restricting the purchaser’s right of set-off is listed in the Unfair Terms in Consumer Contracts Regulations as one of the categories of terms which may be unfair.  If, contrary to my view, this provision had the effect for which Miss Hilliard contends of requiring a purchaser to pay for extras which were not provided before obtaining the property in the boat, then I think that it would be an unfair term.
62.	Thirdly, in any event, it would have been open to me, if necessary, to make the court order required by clause 5.2, and I would have been prepared to do so.  
63.	Miss Hilliard further submitted that Mr. and Mrs Head were in effect seeking an order for the specific performance of the contract, and that this was a discretionary remedy which the court often declined to grant in the case of a sale of goods where the goods are not unique.  She also referred me to Benjamin on Sale of Goods, 7th edition, paragraph 17-100, which states:-
“If the seller becomes insolvent after he has received the price from the buyer but before he has delivered the goods, an order for specific performance will give the buyer priority over other creditors of the seller by taking the goods out of the seller’s estate: for this reason, an order is unlikely to be made in these circumstances.”

64.	The authority for this proposition is a dictum of Atkin L.J. in Re Wait [1927] 1 Ch. 606 at 640.  This was a case which concerned a consignment of wheat which it was held by a majority of the Court of Appeal were not specific or ascertained goods in respect of which a specific performance of the contract of sale would be ordered as the remedy of the sub-purchasers under section 52 of the Sale of Goods Act 1893.  In that context, what Atkin L.J. said was:
“The nett result of this decision [the decision of the Court of Appeal] is that the buyer of goods in these circumstances is in no better position in bankruptcy than the seller.  If a seller of goods delivers them to the buyer before payment, trusting to receive payment in due course, and the buyer becomes bankrupt, the seller is restricted to a proof, and can assert no beneficial interest in the goods …”

65.	It seems to me that the true position is quite different where the property in the goods has passed to the buyer.  In such a case, the buyer is entitled to the goods and there would be no point in refusing an order for specific performance of the contract (or an order for delivery up under the Torts (Interference with Goods) Act 1977), since the liquidators, or in this case the administrators, could not in practice sell the goods and use the proceeds for the benefit of the creditors generally. To do so would involve him and those to whom he sold in acts of conversion.  This conclusion is supported by Jones and Goodhart on Specific Performance 2nd edition at 150-1:-
“But very different considerations come into play if the defendant, whether seller or buyer, is insolvent.  Equity, as well as commercial convenience and stability, demands that in these circumstances a buyer should be denied specific performance if the consequence of a specific performance order would be to prefer the buyer to the seller’s general creditors.
Where the property in the goods has passed to the buyer but they have not yet been delivered, the position is very different.  The goods already belong to the buyer and, if they have not been paid for, the insolvent seller is simply a creditor of the buyer.  If the liquidator of the seller sells the goods he will have committed an act of conversion for which he will be accountable to the buyer.
In such a case there may be further obligations of the seller under the contract, such as an obligation to deliver the goods.  It is very unlikely that the seller would be ordered to perform the outstanding obligations.  The normal remedy for the buyer would be to make its own arrangements for collection of the goods, and claim the extra cost as a debt or set-off in the insolvency.  If the seller or its liquidator refused to handover the goods, it may be that the buyer could, if it has paid or tendered the purchase price, obtain an order for specific delivery.”

66.	In this case, Mr. Shivji has indicated that Mr. and Mrs. Head require only a declaration that they are the owners of the vessel, to which they are clearly entitled.  They have not sought an order for specific performance of the Company’s obligations to commission the vessel or provide a mooring; clearly no such order could have been made.  But I can see no reason why they should not, should it become necessary, be granted an order for delivery up of the vessel which belongs to them.  Such an order could be made under the 1977 Act, which does not involve consideration of whether the goods are unique or sufficiently unusual to warrant an order for specific performance under section 52 of the Sale of Goods Act 1979.  Even if one looks at the matter from the point of view of specific performance, the modern authorities establish that the discretion is to be exercised more flexibly than in earlier times: see Chitty on Contracts vol.1 paras. 27-013 to -016.  In the present case, there would be every reason to make an order for specific performance of the specific vessel which Mr. and Mrs. Head had agreed to buy, with some extras fitted in accordance with their requirements.  To refuse an order would, apart from unfairly depriving Mr. and Mrs. Head of their property, for which they have paid in full, be likely to spoil their planned sailing activities for a considerable time. Also it would be pointless, since the administrators could not sell the boat and the unsecured creditors would not benefit.
67.	For these reasons, I will grant a declaration that Mr. and Mrs. Head are the owners of the vessel, and any other appropriate relief which they may require in order to obtain possession of it.  It is unnecessary for me to consider the interesting arguments on the question of whether Mr. and Mrs. Head would be entitled to an equitable lien over the proceeds of a sale by the administrators of the boat.
Mr. Staples
68.	On 8th August 2007, Mr. Staples agreed to buy second-hand motorboat “Cher” for £88,000.  There was a written contract, no. 7080, but it was unsigned.  The payment schedule provided for a part-exchange of Mr. Staples’ boat “Hollie”, for which £30,000 credit was to be given.  Mr. Staples and the Company signed a Part Exchange Agreement on 10th August 2007, and Mr. Staples also signed the Company’s standard terms and conditions which were expressed to be a part of it.
69.	On 13th August 2007, Mr. Staples paid £58,000 into the client account.  He was told of the administration on 15th August 2007, but an employee of the Company assured him that everything would be all right, since his money was in the client account and the charge in favour of Lombard over “Cher” would be cleared.  He was given a completed and signed Bill of Sale for “Cher” dated 15th August 2007, purporting to transfer title to him, but the charge was not paid off and it was repossessed by Lombard.  “Hollie” remains in the possession of the administrators.
70.	The administrators accept that Mr. Staples is entitled to the £58,000 in the client account, and the issue is whether he is also entitled to the return of “Hollie”.  Mr. Allsop submitted that, on the proper construction of the Part Exchange Agreement, the title to “Hollie” had not passed to the Company. Miss Hilliard submitted that it has.
71.	On the front of the Agreement for the Part Exchange of a Second Hand Vessel, Recital B provides:
“The Vendor(s) are the sole owner(s) of a vessel, the details of which are set out below, which is to be offered to [the Company] in part payment of the purchase monies owed by the Vendor(s) pursuant to the New Vessel Agreement …”

Details of the second hand vessel are then given and the amount of the part Exchange Allowance is specified (in this case £30,000).  The New Vessel is defined as “the vessel that the vendor has agreed to purchase from [the Company] pursuant to the New Vessel Agreement, which in this case is defined as Contract No. 7080 in Recital A, clearly this refers to the unsigned contract.
72.	In the Terms and Conditions, clause 4.2 provides that the title and risk in the Vessel (meaning the second hand vessel) “shall pass to the Company on payment of the Part Exchange Allowance which payment shall be made on the date specified in accordance with the New Vessel Agreement”.
73.	On the face of the unsigned New Vessel Agreement, Contract No. 7080, there is a Payment Schedule which reads:
“(a)	Part exchange 09.08.2007 £30,000.00

(b)	Balance in cleared funds 14.08.2007 £58,000.00
Total payable £88,000.00

(in cleared funds prior to handover)”

74.	Clause 8.3.1 of the Terms and Conditions relating to contracts for the sale and supply of new vessels provides that “title in a vessel which is taken in part-exchange passes to the Company at the time that the Company gives credit for the price of the vessel concerned in the Company’s books”.
75.	I accept Mr. Allsop’s submission that there was no “payment of the Part Exchange Allowance” as defined by clause 4.2 of the Part Exchange Terms of Agreement.  What that required was that payment was to be made on the date specified in accordance with the New Vessel Agreement.  On a natural reading of that provision, this does not refer to the “payment” made by the purchaser of the new vessel by handing over the used vessel, but to the payment made to the purchaser of the new vessel in return for his having handed it over.
76.	When one looks at the front of the Sale and Purchase Agreement for the used vessel, the Payment Schedule sets out the schedule for the payments to be made by the purchaser of the new vessel.  What it means is that the purchaser must deliver the used vessel in part exchange, at a value of £30,000, on 9th August 2007. However, 9th August 2007 is not the date on which the Part Exchange Allowance is to be paid to Mr. Staples, as Miss Hilliard submits.  The date on which this is to happen is the date specified in the Terms and Conditions i.e. the date on which the price is credited in the Company’s books.  There is no evidence that this ever happened.  I therefore hold that the title to “Hollie” has at all times remained with Mr. Staples, and that he is entitled to recover it.
77.	Mr. Allsop also submitted, in the alternative, that any transfer of title to “Hollie” was as a matter of construction or implication subject to a condition precedent that the contract to purchase “Cher” was effective.  I doubt whether this argument is correct.  The ordinary position, where a seller transfers title to the goods in advance of receiving payment is that his only remedy is to sue for the price.  He cannot recover the goods on the basis of a total failure of consideration, because it would be anomalous to enable him to prefer his position to that of the general creditors: see Goff on Restitution 7th edition paragraph 19-011. I do not see why the position should be any different where the title to goods given in part exchange is passed in advance of receiving the consideration for them, and it seems to me that Mr. Allsop’s argument is a cogent, but unjustified, attempt to avoid the usual consequences of passing title to goods in a sale of goods transaction in advance of receiving the consideration for them.  However, it is not necessary for me to decide the point, since I have held that title did not pass.
Burton Waters Marina Limited
78.	One of the manufacturers for which the Company was a dealer was Sealine International, with which it had a Dealer Agreement dated 7th December 2005. One of the Company’s dealers was Burton Waters Marina Limited (“BW”) which had an annual purchase commitment. BW ordered a Sealine F37, hull number GB-SIL3F288H708 in August 2006 and paid £194,953.65 for it on 10th August 2007. Normally, the money would have been paid into the current account but one of the Company’s directors, Mr. Corkhill, requested BW to arrange payment to the client account, which is what happened.
79.	BW had agreed with the Company that the vessel was to be collected from Sealine’s factory in Kidderminster early on 13th August 2007, but Sealine would not release it because it had not received payment by the Company. After abortive enquiries of Mr. Corkhill, it was agreed between Sarah Peacock, BW’s Sales Administrator, and Richard Horton of Sealine’s Finance Department that Sealine would release the vessel to BW on the understanding that Sealine would retain title pending receipt of the purchase monies from the Company and on that basis it was released to BW’s transportation firm, Grimley Freight Limited.
80.	Sarah Peacock had no reason to doubt that the Company would pay Sealine, in accordance with assurances which it had given. There had been a previous occasion in July 2007 when the Company had not made an advance payment and when Sealine had agreed to release the boat conditionally upon retaining title pending payment, which had then been made.
81.	Sarah Peacock amended the e-mail which she had sent on the previous occasion, and her e-mail of 13th August 2007 reads as follows:-
“Full and final funds for the above boat were received by BA Peters at 12:14 on Friday, 10th August. I understand that BA Peters have not yet forwarded the funds on to you and that F37-288 remains the property of Sealine International until funds are received by yourself.

Please release funds to allow transport to ship the boat to us for our open weekend.”

(The reference to the open weekend was part of the earlier email which was not removed from the text of this email.)
82.	The relationship between BW and the Company was governed by a Sales and Service Dealer Agreement dated 29th August 2006, clause 4 of which provides as follows:-
“Orders: Dealer agrees to submit orders to Peters in a manner and format prescribed by Peters, which orders shall be subject to Peters’ then current terms and conditions of sale.”

As is clear from earlier parts of this judgment, the Company’s terms and conditions provided that the property in boats sold by the Company would pass on payment of everything that was due to the Company. 
83.	The issue in this case is whether title to the vessel has passed to BW. Miss Hilliard on behalf of the administrators submits that it has, Mr. Allsop for BW that it has not. Sealine was not represented at the hearing, but submitted that title was retained by it, in which event BW would be entitled to recover £194,953.65 from the client account.
84.	BW’s order was placed on a Dealer Order Form on 2nd October 2006. The order specified the type of boat, a Sealine F37, and an estimated factory completion date of July 2007, subject to the specification being received by 9th April 2007. Sealine’s Builder’s Certificate dated 2nd July 2007 confirmed that it had built the vessel and gave its hull number as set out above. The documents also include a Sale and Purchase Agreement dated 23rd July 2007 for a new motor vessel, but it was not signed by either party.
85.	The relationship between the Company and Sealine was governed by the 2006 Dealer Agreement, which appointed the Company as Sealine’s Dealer “for the retail sale, display and servicing of the Sealine product(s), parts and accessories identified in Schedule 1. There are a number of relevant provisions:-
(a)	Clause 1 provided that the Company should focus its sales, display and service efforts within the territory identified in Schedule 1, which was the United Kingdom and the Balearic Islands. 
(b)	Clause 2 provided that the Company should sell at retail, display and service Products only at the locations specified in Schedule 1, which specified certain of the Company’s selling locations.
(c)	Clause 3A required the Company to “devote its best efforts to aggressively promote, display, advertise and sell Products” at dealer locations.
(d)	Clause 5 provided that the terms of payment would be as specified from time to time by Sealine.
(e)	Clause 8 however provided that all sales of Products should be paid for in advance unless otherwise agreed, and that Sealine retained a security interest in all products sold and in all proceeds arising out of the sale of Products unless paid for in full and that “to the extent allowed by law”, Sealine should retain title in and to the Products until such Products were paid for in full.
(f)	Clause 13 provided that the Company was not, and should not represent itself to be, Sealine’s agent.
86.	Taking Miss Hilliard’s submissions in the order of the chronological events, her first submission is that the Company had Sealine’s express or implied authority to sell the goods in the ordinary course of business and confer a good title on sub-purchasers: see Benjamin on Sale 7th edition §5-156. This seems to me to be clearly right. The terms of the agreement not only permit but require the Company to sell Sealine’s Products and clause 8 by necessary implication recognises that Products might be sold to third parties before Sealine had received payment in full. To hold otherwise would, as in the Romalpa case, Aluminium Industrie Vaassen BV v. Romalpa Aluminium Limited [1976] 1 W.L.R. 676, be inconsistent with the whole commercial purpose of the Dealer Agreement. 
87.	In Romalpa, the Court of Appeal held that it was necessary to imply something into the agreement since otherwise the buyers could not sell the goods until they were paid for, since until then they were the sellers’ goods. Without such an implication the whole business purpose of the transactions would be stultified. What was implied was authority to sell the goods as agents. As Roskill L.J. said in the well-known passage in his judgment at 6900:-
“I see no difficulty in the contractual concept that, as between the defendants and sub-purchasers, the defendants sold as principals, but that, as between themselves and the plaintiffs, those goods which they were selling as principals within their implied authority from the plaintiffs were the plaintiffs’ goods which they were selling as agents for the plaintiffs to whom they remained fully accountable.”

88.	The position is in my view the same in this case. It is true that clause 8 of the Dealer Agreement purports to negative agency, but despite the wide terms of this provision it seems to me that it must be read as being subject to the implied exception which is necessary to give effect to clauses 1 and 3A and the main purpose of the agreement. Therefore, the Company was in my opinion entitled to sell the Products in the ordinary course of business before payment as agent for Sealine, but not in its name. It follows that the Company was entitled to sell the vessel to BW, and that title to it passed when BW paid for it in full, on 10th August 2007. 
89.	Miss Hilliard’s alternative submission was that good title was conferred on BW by virtue of section 25(1) of the Sale of Goods Act 1979, since the vessel was delivered by the Company as a buyer in possession. She relied on the decision of Simon Brown J. in Four Point Garage Limited v. Carter [1985] 3 All E.R. 12 that, where goods were delivered directly by the seller to the sub-purchaser, the purchaser was deemed to take constructive delivery of goods and the seller was deemed to act as the buyer’s agent when making delivery to the sub-purchaser. He rejected the submission made in that case that the earlier decision of Hilbery J. in E&S Ruben Limited v. Faire Bros & Co Limited [1949] 1 K.B. 254 turned on its own special facts and said:
“It seems to me a perfectly sound principle of general application. There appears no possible reason to differentiate under the statute between a case where, as here, the plaintiff sellers themselves deliver direct to the sub-purchaser and a case where, as could so easily have occurred instead, the seller delivers to his buyer, who then forthwith delivers on to the sub-purchaser. Often no doubt the precise arrangement would depend on no more than the geographical relationship of the three parties.”

90.	In my view, the present case is clearly distinguishable. Whilst initially the arrangements were such as to give rise to the usual inference that the seller was delivering the goods to the sub-purchaser on the purchaser’s behalf, in this case, Sealine was not willing to deliver to the Company and permitted BW to take possession only on the basis of written confirmation that Sealine retainedtitle. It was, as Mr. Allsop submitted, a private arrangement between them, and not delivery by Sealine as agent for the Company.
91.	 Nevertheless, I have held that title has passed on 10th August 2007, and it is then necessary to consider the effect, if any, of the private arrangement confirmed in Sarah Peacock’s email of 13th August, and whether it amounted to an agreement between Sealine and BW that Sealine should keep the title to the boat. I do not think that it did. Sarah Peacock merely records the understanding, based on what Sealine had said, that Sealine retained the title and agreed to preserve this pending payment by the Company. There was no agreement which had the effect, if the understanding was wrong, of revesting title in Sealine. Alternatively, if there was, it is common ground between Mr. Allsop and Miss Hilliard that the agreement would be void for common mistake as to the ownership of the property: in Bell v. Lever Brothers [1932] A.C. 161 and 217-8, per Lord Atkin; Great Peace Shipping Ltd v. Tsarlines Salvage (International) Ltd [2002] Q.B. 679 paragraphs 111-118. I therefore hold that the agreement on 13th August 2003 had no effect on BW’s title, and that BW is the owner of the boat.
92.	Next I must consider whether, in circumstances in which I have held that BW is entitled to the boat, the amount of £194,953.65 in the client account belongs to Sealine, or whether it becomes available for the general body of creditors. Miss Hilliard submitted that Sealine has no claim to it, because the Company only intended to establish a trust in favour of its customers. This is so (except for the brokerage sales where the Company acted as stakeholder), but it is necessary for me to consider whether the effect of its terms of business was to impose a trust over the proceeds of sale. This is not an easy point and I would like Sealine to have a further opportunity to consider its position. I therefore direct that Sealine should be informed of my decision that the property in the vessel has passed to BW, should be informed that I am considering who is entitled to the proceeds of sale, and be sent copies of Miss Hilliard’s submissions on this question, and should be asked whether it wishes to instruct lawyers to consider its position.
Conclusion
93.	I hope that, with the exception of the last point, I have dealt with all outstanding issues. If not I should be glad if the parties would let me know. I should also be grateful if Miss Hilliard would seek to agree directions with other counsel and to let me know when this has been done.
94.	On costs, I do not think that it is right to say that this application has concerned only or mainly the rights of those entitled to money in the client’s account. It has resulted in considerable sums being released from the client account for the benefit of the the Company’s other creditors, and may result in a further £194,000 being released. It therefore seems to me that the reasonable costs of all parties should be paid out of the Company’s assets. I will however hear further argument if any party wishes.
95.	If the necessary directions are agreed, or if any outstanding points can be dealt with by written submissions, there is no need for any party to attend the handing down of the judgment. I will not fix a date for handing down the judgment until I hear further from the parties, but in the meantime the substance of the judgment may be communicated to the parties involved, and if any order is required urgently to ensure that a party is reunited with his boat, I will make it in advance of other directions.
96.	I am grateful to Miss Hilliard, and to all counsel, and to those instructing them, for the careful presentation of the evidence and of the arguments.
N. Strauss Q.C.
Deputy judge Ch. D.
29th April 2008