CHAPTER VII. Chap. VII. Mortgage and pledge distinguished. Apparent possession. BILLS OF SALE. A BILL OF SALE, in its ordinary popular meaning, is a document whereby the legal property in chattels is transferred to a person who lends money upon the security thereof, when the possession does not pass; but the term "bill of sale" properly denotes any instrument whereby the property in chattels is transferred, whether absolutely or by way of mortgage; and, where there is valuable consideration for the transfer, the instrument need not be a deed. A mortgage of chattels is to be distinguished from a pledge or pawn; under the latter the possession is given to the person who lends money on the chattels.1 Where the bill of sale is by way of mortgage, the property passes to the grantee subject either to a condition making the transfer void on performance of the condition, as by the payment of money, or to a proviso entitling the grantor to redeem the property by such payment, and thereupon to have it reconveyed to him. Personal property in general passes by delivery of possession, and the possession of such property is an apparent indication of ownership. If a purchaser or mortgagee of chattels allows them to remain in the possession of the vendor or mortgagor, the latter is enabled to appear to the world at large as the owner of the property, and to obtain credit as such; and on this ground it was held in many cases that transactions were fraudulent as 13 Eliz. c. 5. against creditors, by virtue of the statute 13 Eliz. c. 5.5 That Act avoids, as against creditors, any alienation of lands, goods, or chattels made with intent to delay, hinder, or defraud creditors; 1 Mills v. Charlesworth, 25 Q. B. D. 421, 424; [1892] A. C. 231; Grigg v. National, &c. Co., [1891] 3 Ch. 206. Ante, p. 41. 2 Flory v. Denny, 7 Ex. 581. 3 Ante, pp. 15, 41. See per Plumer, M. R., Dearle v. Hall, 3 Russ. 22; 27 R. R. 1. 5 Made perpetual by 29 Eliz. c. 5; Twyne's Case, 3 Rep. 80; 1 Sm. L. C. 1. but the Act does not affect bonâ fide purchasers for value without Chap. VII. notice.1 It is, however, now settled law that the retention of possession by the grantor of chattels is only evidence of fraud, and not conclusive proof of it and there is this distinction to be observed between absolute sales and mortgages, that, on an absolute sale, the retention of possession by the vendor is primâ facie inconsistent with the nature of the transaction; whereas retention of possession by a mortgagor is consistent with a transaction of mortgage.3 It is sufficient for the security of a mortgagee that he should have a right to take possession of the mortgaged property upon default made by the mortgagor in performing his obligations under the bill of sale; and it was usual in mortgage bills of sale to provide expressly that until default the mortgagor should remain in possession. to If a transfer of chattels was made bonâ fide, and was not a contrivance to defraud creditors, it was unimpeachable under the 13 Eliz. c. 5, even where the transaction was secret and the grantor remained in possession of the chattels and appeared to the world to be their owner. Persons were thus enabled " obtain fictitious credit, which their real circumstances did not warrant, by retaining apparent possession of goods, the ownership of which they had parted with to others, but which appeared to be really their own by remaining in their possession—a course of proceeding calculated to prejudice the honest creditor."4 Where a debtor became bankrupt or insolvent, a remedy was provided by successive Bankruptcy Acts, which, in such cases, have made available, for the benefit of the debtor's creditors generally, all goods which were in his "possession, order, or disposition," in his trade or business, at the commencement of the bankruptcy, by the consent or permission of the true owner, a term which was construed to include a mortgagee, and of which the debtor was reputed owner. Secret alienachattels. tions of Reputed ownership under Bankruptcy Acts. But, except as above mentioned, the danger to creditors of Object of Bills of Sale Chap. VII. transfers of the property in personal chattels by secret bills of sale was not provided against until the year 1854, when the first Bills of Sale Act (17 & 18 Vict. c. 36) was passed, the object being to destroy the secrecy of such transactions by requiring bills of sale to be recorded in a register, open to inspection on payment of a small fee, and by providing that, unless so registered, they should be void as against the general creditors on the bankruptcy or insolvency of the grantor and as against his execution creditors. Bills of Sale Act, 1854. Lord Blackburn has given the following account of the causes which led to the enactments known as the Bills of Sale Acts :-1 "At common law, a man might take a security upon goods without carrying away the goods or taking possession of them; he might take a sale of them out and out, and he might take the legal property in them subject to the power to redeem them (what is commonly called a mortgage) without taking possession of them. The law on the subject will be found in Twyne's Case, and the notes upon Twyne's Case But this rule got established, that when the goods were not taken away but were left in the hands of the man who had had them previously, that which had been thought before to make the transaction void was really no more than evidence to go to the jury of fraud; and if a man came forward suddenly, when there was an execution, for instance, issued against the person in possession of the goods, and said, 'At an antecedent time I had a security upon these goods, and I left them in the possession of the debtor all that time,' the not having taken possession was evidence that the thing was a sham; it was not conclusive; it was not a matter of law; but it was evidence that the thing was a sham. Upon that two evils arose, and very important ones they were. In the first place, it often happened that there was really a sham put up to endeavour to defeat a man, and there was a great quantity of perjury, of fighting and expense, before it was proved to be a sham. That was a great evil. The other was that there were real honest transactions which were asserted to be shams when they were not, and in those cases there was apt to be much perjury and great expense before it was decided. For those reasons it was thought, and reasonably and properly so, that it was desirable to put a stop to this. That was the beginning of the series of Bills of Sale Acts, the first of which was passed in 1854." The preamble of the Bills of Sale Act, 1854, sets forth that "frauds are frequently committed upon creditors by secret bills of sale of personal chattels, whereby persons are enabled to keep up the appearance of being in good circumstances and possessed of property, and the grantees or holders of such bills 1 Cookson v. Swire, 9 App. Cas. 664. 3 1 Sm. L. C. 1. 4 17 & 18 Vict. c. 36. of sale have the power of taking possession of the property of Chap. VII. such persons, to the exclusion of the rest of their creditors." The Act then proceeded to enact that every bill of sale1 of personal chattels,1 whether absolute or conditional, whereby the grantee or holder should have power to seize or take possession of any property comprised therein, should be registered in the manner mentioned in the Act within twenty-one days after the making or giving of the bill of sale; and, if not so registered, should be void as against the grantor's assignees in bankruptcy or insolvency, and as against the assignees under any assignment for the benefit of his creditors, and as against all sheriff's officers and other persons seizing the effects in execution of any process against the grantor, so far as regarded personal chattels in the possession or apparent possession of the grantor. By an amending Act of 1866, the registration was required to be renewed every five years. 2 The Acts of 1854 and 1866 were repealed in 1878, and the law now in force is contained in the Bills of Sale Acts, 1878, 1882, 1890 and 1891.3 These Acts relate only to "personal chattels," which expression, according to the Act of 1878,* means Bills of Sale Acts, 1878, "Goods, furniture, and other articles capable of complete transfer Definition of by delivery, and (when separately assigned or charged) fixtures and "personal growing crops." But does not include:-6 chattels," "Chattel interests in real estate, nor fixtures (except trade machinery Property as hereinafter defined), when assigned together with a freehold or exempted leasehold interest in any land or building to which they are affixed, from Act. nor growing crops when assigned together with any interest in the land on which they grow, nor shares or interests in the stock, funds, or securities of any government, or in the capital or property of incorporated or joint stock companies, nor choses in action, nor any stock or produce upon any farm or lands which by virtue of any covenant or agreement or of the custom of the country ought not to be removed from any farm where the same are at the time of making or giving of such bill of sale." 1 These terms are defined by sect. 7 of the Act. 2 29 & 30 Vict. c. 96. 341 & 42 Vict. c. 31; 45 & 46 Vict. c. 43; 53 & 54 Vict. c. 53; 54 & 55 Vict. c. 35. As to the sale under a bill of sale of crops, manure, &c., on lands in lease, see 56 Geo. 3, c. 50, s. 11. 4 41 & 42 Vict. c. 31, s. 4. Ships are G.P.P. not within the Act, post, p. 111. See s. 7; Roberts v. Roberts, 13 6 S. 4. 7 Chap. VII. Trade machinery. Bills of sale within Act. "Bill of sale" defined. Documents excluded from Bills of Sale Acts. "Trade machinery "is personal chattels for the purposes of the Act, and means "the machinery used in or attached to any factory or workshop," with certain specified exceptions.1 There is also a full definition of "factory or workshop."1 The Act of 1878 applies to "every bill of sale. . . whereby the holder has power, either with or without notice, and either immediately or at any future time, to seize or take possession of any personal chattels comprised in or made subject" thereto.2 The expression "bill of sale" is defined by the Act of 18783 for the purposes of that Act; and the same definition is incorporated in the Act of 1882, subject to the qualification that the latter Act does not apply to bills of sale "given otherwise than by way of security for the payment of money." It includes 5 "Assignments, transfers, declarations of trust without transfer, inventories of goods with receipt thereto attached, or receipts for purchase moneys of goods, and other assurances of personal chattels, and also powers of attorney, authorities, or licences to take possession of personal chattels as security for any debt, and also any agreement, whether intended or not to be followed by the execution of any other instrument, by which a right in equity to any personal chattels, or to any charge or security thereon, shall be conferred." The following documents are excluded from both Acts, namely: "Assignments for the benefit of the creditors of the person making or giving the same, marriage settlements, transfers or assignments of any ship or vessel or any share thereof,10 transfers of goods in the ordinary course of business of any trade or calling, bills of sale of goods in foreign parts or at sea, bills of lading, India warrants, warehouse keepers' certificates, warrants or orders for the delivery of goods," or any other documents used in the ordinary course of business as proof of the possession or control of goods, or authorizing or 1 41 & 42 Vict. c. 31, s. 5. 2 Ib. s. 3. 3 Ib. s. 4. 4 45 & 46 Vict. c. 43, s. 3. 5 41 & 42 Vict. c. 31, s. 4. 6 Not being a parol agreement; Ex p. Hauxwell, 23 Ch. D. 626. See also Jarvis v. Jarvis, 69 L. T. 412. 7 41 & 42 Vict. c. 31, s. 4; 45 & 46 Vict. c. 43, s. 3. 8 I.e., of all the creditors; Boldero v. London and Westminster Loan Co., 5 Ex. D. 47; Hadley v. Beedom, [1895] 1 Q. B. 646. 9 This includes informal ante-nuptial agreements for a settlement; Wenman v. Lyon, [1891] 1 Q. B. 634, 2 Id. 192; but a post-nuptial settlement must be registered; Ashton v. Blackshaw, 9 Eq. 510. 10 Gapp v. Bond, 19 Q. B. D. 200. 11 Grigg v. National, &c. Co., [1891] 3 Ch. 206. |