PASSING OF PROPERTY IN THE GOODS

270 Welsh Development Agency v. Export Finance Co Ltd Court of Appeal (Civil Division) CA (Civ Div) Dillon, Ralph Gibson and Staughton L JJ Judgment delivered 19 November 1991 Receivership--Registrable charge--Company financed export trade under "masteragreement" with finance company--Agreement authorised company to agree to sellon finance company's behalf "goods immediately thereafter agreed to be sold to"finance house--Whether agreement created charge--Whether finance company ordebenture holder entitled to proceeds of sales--Receivers instructed overseasbuyers to pay debts to them--Whether receivers liable for wrongful interferencewith contract--Companies Act 1985, sec. 395, 396; Insolvency Act 1986, sec.234(3), (4). This was an appeal by the defendant, Export Finance Co Ltd ("Exfinco"),against the judgment of Browne-Wilkinson V-C [1990] BCC 393 that a "masteragreement" between Exfinco and Parrot Corporation Ltd ("Parrot") relating tothe export of goods by Parrot created a registrable charge. Parrot manufactured and exported floppy discs, and had given the plaintiff,Welsh Development Agency ("WDA"), a debenture containing a floating charge andpower to appoint a receiver. WDA appointed receivers to Parrot and claimed thatby virtue of the charge in the debenture it was entitled to receive payment ofdebts owed to Parrot by overseas buyers. The receivers called on overseasbuyers to pay outstanding moneys to them rather than into the "collectionaccounts" specified in the master agreement. Exfinco argued that under the master agreement, which authorised Parrot "toagree on behalf of Exfinco" - as undisclosed principal - "to sell to any buyergoods immediately thereafter agreed to be sold" by Parrot to Exfinco, title inthe goods (until vested in the overseas buyers) vested in Exfinco, and that thedebts were never the book debts or property of Parrot within WDA's charge andwere payable to Exfinco. Exfinco counterclaimed alleging that the receivers bycountermanding the instructions to overseas buyers to pay into the collectionaccounts had wrongfully interfered with the contractual relations betweenParrot and Exfinco or between Exfinco and the overseas buyers, and were liablein damages in cases where the overseas buyers because of the conflictinginstructions had made no payment at all. The receivers claimed to be protectedby sec. 234(3) and (4) of the Insolvency Act 1986, or by the rule (in Said vButt [1920] 3 KB 497) that as Parrot's agents they could not be liable forwrongful interference with Parrot's contractual relations. The judge held that the master agreement was flawed, because it could not besaid with certainty at the time of a sale by Parrot to an overseas buyerwhether Parrot had authority to contract on Exfinco's behalf because thatauthority was qualified in that it only extended to goods which complied withvarious warranties; and that transactions under the master agreement, althoughgenuinely cast in the form of sales of goods were by way of secured loan andthat the master agreement created a charge which was void against WDA for wantof registration. Held, allowing the appeal, and (by a majority) dismissing the counterclaim: 1 The question whether goods complied with the warranties could be discoveredex post facto and did not depend on any further agreement between the parties.It did not matter to the validity of the master agreement that that fact wasnot known to the parties when a contract was made by Parrot with an overseasbuyer. The answer could be ascertained by enquiry - if it was ever relevant todo so - and when it had been ascertained any possible uncertainty was removed. 2 *271 There was no clear touchstone by which it could be said that adocument which was not a sham and was expressed as an agreement for sale mustas a matter of law amount to no more than the creation of a mortgage or chargeon the property expressed to be sold. Looking at the provisions in the masteragreement as a whole, it was valid as what it purported to be, namely anagreement for the sale by Parrot to Exfinco of goods about to be sold by Parrotto overseas buyers, and not merely an agreement for secured loans. (Lloyds andScottish Finance Ltd v Cyril Lord Carpet Sales Ltd (1979) 129 NLJ 366 applied.) 3 The receivers were not protected by sec. 234(3) and (4) because thesubsections only covered seizure and disposal of tangible property, and becausethey never seized or disposed of the debts. 4 (Per Dillon and Ralph Gibson LJJ) The receivers interfered with the masteragreement but were protected by the rule in Said v Butt. 5 (Per Dillon and Ralph Gibson LJJ) There was no interference by thereceivers with a separate contract by Exfinco to which Parrot was not a party. 6 (Per Staughton LJ) The receivers could be liable for procuring breaches ofcontract by the overseas buyers. The following cases were referred to in the judgments: A G Securities v Vaughan & Ors [1990] 1 AC 417. Aslan v Murphy [1990] 1 WLR 766. Charge Card Services Ltd, Re (No. 2) (1986) 2 BCC 99,373; [1987] Ch 150. Curtain Dream plc v Churchill Merchanting Ltd [1990] BCC 341. Garnac Grain Co Inc v HMF Faure and Fairclough Ltd & Anor [1966] 1 QB 650. Gaskell & Anor v Gosling & Anor [1896] 1 QB 669. Gisborne & Anor v Burton [1989] QB 390. Hong (Chow Yoong) v Choong Fah Rubber Manufactory [1962] AC 209. Humble v Hunter (1848) LR 12 QB 310. Inglefield (George) Ltd, Re [1933] Ch 1. Lathia v Dronsfield Bros Ltd [1987] BCLC 321. Lloyds and Scottish Finance Ltd v Cyril Lord Carpet Sales Ltd & Ors (1979)129 NLJ 366. Lovegrove, Re [1935] Ch 464. McEntire & Anor v Crossley Bros Ltd [1895] AC 457. Mackay, Ex parte (1873) LR 8 Ch App 643, 42 LJ (NS) Bankruptcy 68. Mancetter Developments Ltd v Garmanson Ltd & Anor (1986) 2 BCC 98,924;[1986] QB 1212. May and Butcher Ltd v The King [1934] 2 KB 17n. Midland Bank Trust Co Ltd & Anor v Green [1981] AC 513. Monolithic Building Co, Re [1915] 1 Ch 643. National Westminster Bank Ltd v Halesowen Presswork & Assemblies Ltd [1971]1 QB 1; [1972] AC 785 (HL). O'Brien v Dawson & Ors (1942) 66 CLR 18. Official Assignee & Ors v Dowling & Ors [1964] NZLR 578. Palette Shoes Pty Ltd v Krohn & Anor (1937) 58 CLR 1. Performing Right Society Ltd v Ciryl Theatrical Syndicate Ltd [1924] 1 KB 1. Rainham Chemical Works Ltd & Ors v Belvedere Fish Guano Co Ltd [1921] 2 AC465. Ramsay (W T) Ltd v I R Commrs [1982] AC 300. Reardon Smith Line Ltd v Yngvar Hanson-Tangen [1976] 1 WLR 989. Rutherford v Poole [1953] VLR 130. Said v Butt [1920] 3 KB 497. *272 Salomon v A Salomon & Co Ltd [1897] AC 22. Scammell (G) and Nephew Ltd v Hurley & Ors [1929] 1 KB 419. Scammell (G) and Nephew Ltd v Ouston & Anor [1941] AC 251. Shell-Mex and BP Ltd v Manchester Garages Ltd [1971] 1 WLR 612. Siebe Gorman & Co Ltd v Barclays Bank Ltd [1979] 2 LI Rep 142. Snook v London and West Riding Investments Ltd [1967] 2 QB 786. Street v Mountford [1985] AC 809. Sudbrook Trading Estate Ltd v Eggleton & Ors [1983] 1 AC 444. Telemetrix plc v Modern Engineers of Bristol (Holdings) plc& Ors (1985) 1 BCC99,417. Thomas v Kelly & Anor (1888) 13 App Cas 506. Thomson (D C) & Co Ltd v Deakin & Ors [1952] Ch 646. Webb v Smith (1885) 30 ChD 192. Willingale v International Commercial Bank Ltd [1978] AC 834.RepresentationMichael Crystal QC and Richard Adkins (instructed by Linklaters & Paines) forExport Finance Co Ltd.Gabriel Moss QC and Martin Pascoe (instructed by Morgan Bruce, Cardiff) forWelsh Development Agency.JUDGMENTDillon LJ: This is an appeal by the defendant in the action, Export Finance Co Ltd("Exfinco") against an order of the former Vice-Chancellor, Sir NicolasBrowne-Wilkinson, made on 28 March 1990 when he handed down a reserved judgmentafter the trial of the action [1990] BCC393. The respondents to the appeal are the Welsh Development Agency ("WDA"), andtwo individuals, Mr J P Considine and Mr H G Jones ("the receivers"). WDA isthe sole plaintiff in the action; the receivers are with WDA the defendants toa counterclaim by Exfinco. The effect of the Vice-Chancellor's order was, briefly, that he held thatWDA, and not Exfinco, was entitled to all sums payable by overseas buyers inrespect of sales of goods - in fact floppy discs for computers - made by ParrotCorporation Ltd ("Parrot") to such buyers and remaining unpaid as at 16 May1989, whether since paid or not, and he dismissed Exfinco's counterclaim. Exfinco is a company formed to provide finance to exporters. From September1985 until 16 May 1989, Exfinco provided certain finance to Parrot in relationto exports of goods by Parrot. This finance was provided, purportedly, underthe terms of a master agreement dated 29 July 1985 made between Exfinco andParrot as varied by a supplemental agreement of 5 July 1988. WDA was formed to promote industrial activity in Wales. Parrot carried on itsbusiness at Cwmbran, and was one of the bodies assisted by WDA. In particularthere was a revolving credit facility provided by other financiers to Parrotunder a facility letter of 31 October 1985, and WDA by a deed of guarantee ofthat date guaranteed to the financiers Parrot's obligations under the facilityletter. Consequently Parrot gave WDA a counter-indemnity on 31 October 1985against WDA's liabilities under the deed of guarantee, and issued to WDA, byway of security for the counter-indemnity, a debenture ("the WDA debenture")dated 31 October 1985. The WDA debenture secures all moneys due to WDA underthe counter-indemnity. It was duly registered under the Companies Act inNovember 1985. In due course WDA was required to make payment to the financiers under itsdeed of guarantee to them, and did so. Then on 16 May 1989, the date referredto in the judge's *273 order, WDA duly appointed the receivers to be jointadministrative receivers and managers of the property comprised in and chargedby the WDA debenture. Notice of that appointment was given to Exfinco on thesame day, and on the same day Exfinco summarily terminated the masteragreement, as it was entitled to under cl. 11(a) thereof. On 16 May 1989, therefore, Parrot ceased trading and there have been nofurther sales of goods by Parrot to overseas buyers, although in fact Parrot,though plainly insolvent, has not yet gone into liquidation. The main dispute,in respect of which the writ was issued on 28 July 1989, is as to whether thereceivers, and therefore WDA, or Exfinco are entitled to the sums payable byoverseas buyers which remained unpaid as at 16 May 1989. In fact, incircumstances to which I shall have to come, some of those moneys have been gotin by the receivers, and others by Exfinco, since 16 May 1989. The moneysactually got in by either side await the outcome of this appeal. But thecounterclaim includes a claim by Exfinco against the receivers for damages forwrongful interference with contract, in that the receivers wrote to theoverseas buyers calling on them to pay all outstanding moneys to the receiversinstead of into the accounts, in fact under the control of Exfinco, into whichthe moneys were payable under the buyers' contracts with Parrot, and as aresult, it is said, large sums have been lost because many buyers, faced withconflicting instructions, chose not to pay at all. The Vice-Chancellor's decision in favour of WDA on the claim is of particularseriousness to Exfinco, since, apart from the amount involved in the presentcase, the master agreement in the present case is in Exfinco's standard form,used in all its other financing transactions with other companies. If a company raises finance by a charge on all or some of its assets, thecharge may require registration under what is now sec. 395 of the Companies Act1985. If a charge is registrable under that section, and is not registered, itwill be void as against a liquidator or, in effect, any secured creditor of thecompany. In the present case if the effect of the transactions between Exfincoand Parrot was to create a registrable charge in favour of Exfinco on assets ofParrot, there was never any registration of that charge. It is well-known, however, that there are ways by which a company can raisefinance which do not involve charging its assets and therefore do not requireregistration under sec. 395. Two well-tried routes are (1) the factoring ofbook debts and (2) the block discounting of hire-purchase or credit saleagreements; see the decision of this court in Re George Inglefield Ltd [1933]Ch 1 and the decisions of this court and of the House of Lords in the case ofLloyds & Scottish Finance Ltd v Cyril Lord Carpet Sales Ltd (1979) 129 NLJ 366.It is now well-established that factoring or block discounting amounts to asale of book debts, rather than a charge on book debts, even though under therelevant agreement the purchaser of the debts is given recourse against thevendor in the event of default in payment of the debt by the debtor. Exfinco did not follow either of these well-tried routes in preparing itsstandard form for its financing transactions. The reason for departing fromthem seems to have been that since factoring and block discounting have becomewell-known as transactions which do not constitute registrable charges onassets of a company and do not normally appear as liabilities in a company'sbalance sheet, the forms of debenture required by banks have become moresophisticated. Thus a bank's debenture, by appropriate provisions, might createa fixed charge in equity on future book debts of a company which would preventthe mortgagor company from disposing of an unencumbered title to the book debtswithout the debenture-holder's consent - Siebe Gorman & Co Ltd v Barclays BankLtd [1979] 2 LI Rep 142. Alternatively a bank's debenture might include acovenant by the company with the bank not to factor, discount or assign bookdebts, and a breach of such a covenant might trigger the appointment of areceiver of the company's undertaking. *274 Exfinco therefore sought by its standard form to structure its financingtransactions with all its various customers in a way which did not include anyassignment or sale of book debts. Instead the apparent intention was that, byacceptances of a standing offer of Exfinco in the management agreement, thecompany - in the present case Parrot - would sell its goods to overseas buyersas agent for Exfinco as undisclosed principal, and the overseas buyer would bedirected to pay the purchase price into a bank account in the name of e.g.Parrot which was under the exclusive control of Exfinco. Under the terms ofsale to the overseas buyer there was to be retention of title to the goodsuntil the price was fully paid, and as a result of the acceptance by e.g.Parrot of Exfinco's standing offer the retained title to the goods would be inExfinco as purchaser from Parrot of the goods to be sold by Parrot to theoverseas buyer as agent for Exfinco as undisclosed principal. As a result the master agreement is a document of remarkable complexity andthe complexity is increased by the fact that the draftsman has sought to getthe best of all possible worlds for Exfinco by providing (1) that Exfinco wouldbe protected by Parrot and - up to 90 per cent - by Export Credit GuaranteeDepartment insurance against default by an overseas buyer in payment of theprice for any goods and (2) that though the goods were to be sold by Parrot asagent for Exfinco, Exfinco should be under no liability to the overseas buyerin respect of the quality of the goods. In the upshot, the attack by WDA on the master agreement is on two counts inthe alternative, on each of which WDA succeeded before the Vice-Chancellor.These two counts are the central issues on this appeal and they are thefollowing. (1) It is said that the complexities of the management agreement are suchthat it is self-defeating, and produces as between Parrot and Exfinco no validagreement at all because, it is said, the management agreement depends on salesbeing made to overseas buyers by Parrot at times when it cannot be known byanyone whether Parrot is selling as principal or as agent for Exfinco. Thus, itis said, there is a conceptual impossibility, or, as the Vice-Chancellor putit, a fundamental legal flaw in the master agreement. (2) Alternatively, it is said that the substance of the master agreement isthat there is no sale of anything to Exfinco, but it merely creates charges onassets of Parrot which are void for non-registration under sec. 395. Before I deal with these main issues, I should deal with another aspect whichthe Vice-Chancellor took first. That is the submission for Exfinco that, as atthe time it took its debenture from Parrot, WDA knew of the existence of theExfinco master agreement, the apparently wide wording in the WDA debentureshould be construed as excluding moneys payable by overseas buyer which wereintended to be covered by the master agreement. WDA had nominated a director to the board of Parrot. The Vice-Chancellorfound that that director knew of the existence of the master agreement,although he did not know its terms. The submission is that because of thatknowledge WDA could not have expected to receive the moneys payable by theoverseas buyers, that that was part of the factual background against which theWDA debenture was granted and should be construed, and consequently that thewords of charge in the WDA debenture should be construed as not extending tothe moneys payable by the overseas buyers. I would reject that submission, asdid the Vice-Chancellor. The words of charge in the WDA debenture are plain andunambiguous and as wide as they could be. The charge includes all freehold andleasehold property etc. and, "SECONDLY all book debts and other debts now and from time to time due orowing to the company *275 AND THIRDLY the goodwill and uncalled capital of the company bothpresent and future and all other the undertaking property and assets of thecompany whatsoever and wheresoever both present and future."I can see no basis of construction whatsoever whereby these words could beconstrued as excluding book debts due from overseas buyers to Parrot which hadnot been effectively sold and assigned out and out to Exfinco or which were thesubject of a registrable charge in favour of Exfinco which, as against WDA, wasvoid for non-registration. Even if WDA supposed that there was some charge,registrable or not, in favour of Exfinco, it would have wanted the WDAdebenture to cover any equity of redemption there might be. Moreover even ifWDA had known the full terms of the master agreement, it would have beenentitled to claim priority if the true effect of the master agreement was tocreate a charge on assets - be it book debts or goods - of Parrot which asagainst WDA was void for non-registration under the Companies Act. See thejudgment of Lord Cozens-Hardy MR in Re Monolithic Building Co [1915] 1 Ch 643which was approved by the House of Lords in Midland Bank Trust Co Ltd v Green[1981] AC 513. I turn therefore to issue (1) set out above, viz. whether there is anyfundamental legal flaw in the master agreement. The provisions of the master agreement relevant to this issue are as follows. By cl. 1 Exfinco authorised Parrot (referred to as "the exporter"), "to agree on behalf of Exfinco to sell to any buyer goods immediatelythereafter agreed to be sold by the exporter to Exfinco pursuant to thisagreement ..." This authority was however subject to restrictions as set out in provisos(a)-(j) of cl. 1. In particular Parrot was to have no authority: "(a) to enter into any agreement on behalf of Exfinco for the sale ofgoods unless such agreement is at all times covered by and complies in allrespects with the requirements of the ECGD guarantee referred to in cl. 4 hereof ... and (h) to enter into any agreement with a buyer on terms or in a manner thatprejudices or affects the rights or remedies of Exfinco as undisclosedprincipal and in particular (but without limitation) its ability to enforcerights against the buyer."By cl. 2 which bears the cross-heading "Exfinco's standing offer" it isprovided that, "Subject to the terms and conditions of this agreement Exfinco herebyoffers to buy from the exporter goods to be sold by the exporter as agents forExfinco to buyers by way of export from the UK ..." This offer in cl. 2 is subject to provisos (a)-(e) as follows: "(a) this offer is a standing offer which may be accepted as hereinafterprovided; (b) save to the extent to which this offer has previously been accepted bythe exporter, Exfinco may at any time by written notice forthwith withdraw orvary it as it thinks fit; (c) this offer does not extend to any goods which the exporters are notauthorised by cl. 1 hereof to agree on behalf of Exfinco to sell to a buyer; (d) this offer extends only to goods which comply with each of thewarranties contained in cl. 5 hereof; and (e) the goods shall remain at the risk of the exporter until the risk inthe goods shall have passed to the buyer in accordance with the contract ofsale to the buyer." Clause 3 is concerned with the acceptance of Exfinco's offer. A revised cl. 3was substituted by a supplemental agreement of 5 February 1988 and is asfollows: *276 "(a) The offer contained in cl. 2 hereof shall not be capable ofacceptance by the exporter until the goods in question have beenunconditionally appropriated by the exporter on Exfinco's behalf to thecontract of sale to a buyer bound to purchase them. Such offer thereafter fromtime to time being accepted in respect of any such goods by the exportersending to Exfinco an acceptance and schedule relating thereto, duly completedby the exporter in such form as Exfinco may from time to time notify to theexporter, together with a copy of each invoice referred to therein andExfinco's offer shall be deemed to have been accepted by the exporter inrespect of any goods for which the exporter dispatches invoices to a buyerdirecting payment to be made to bank accounts opened by the exporter pursuantto cl. 8 hereof, or gives instructions for payment to be made otherwise forExfinco's account, notwithstanding the failure of the exporter to send toExfinco an acceptance and schedule in respect of such goods or the omission ofsuch goods from any acceptance and schedule actually sent by the exporter toExfinco. (b) Receipt by Exfinco of such acceptance and schedule together with thecopies of such invoices, or the dispatch by the exporter to the buyer ofinvoices directing payment as aforesaid, shall constitute an agreement by theexporter to sell and by Exfinco to buy the goods therein described on the termsof this agreement. The property in any such goods shall pass to Exfinco uponmaking of the agreement for sale of the goods between the exporter and Exfincounder this para. (b)."(The original cl. 3 did not include the provision that the dispatch by Parrotto a buyer of invoices directing payment to bank accounts opened by Parrotpursuant to cl. 8 should constitute a deemed acceptance but nothing in thisappeal turns on that amendment.) Clause 4 is concerned with the ECGD guarantee and provides by subcl. (a) and(b) as follows: "(a) The exporter shall at its own expense procure that each and everyagreement to sell goods made by the exporter as agent for Exfinco pursuant tothis agreement is covered by the comprehensive short term guarantee issued bythe Export Credit Guarantee Department ("the ECGD guarantee") incorporating thesales to finance company endorsement (CST) in such forms as may from time totime be issued by ECGD. (b) The exporter shall procure that all moneys payable under the ECGDguarantee in respect of any agreement to sell goods made by the exporter asagent for Exfinco pursuant to this agreement shall be paid direct to Exfincoand not to the exporter." Clause 5 includes warranties and undertakings by Parrot in relation to eachand every agreement to sell goods to Exfinco pursuant to cl. 2 and 3, includingwarranties: "(a) that, forthwith upon entering into any agreement to sell any goods onExfinco's behalf hereunder, it shall accept Exfinco's offer to buy such goodspursuant to cl. 3; (d) that the goods shall comply in all respects with the informationcontained in the acceptance, with all relevant provisions of English andforeign law relating to such goods and with the terms and conditions of theagreements for the sale thereof by the exporter to Exfinco and by the exporteron behalf of Exfinco to the buyer, and that the goods shall be of merchantablequality and fit for the purpose for which they are intended for use by thebuyer; (e) that the exporter shall have agreed on behalf of Exfinco pursuant tothis agreement to sell the goods to the buyers named in each acceptance uponthe terms therein set out and that at the time of the passing of the propertyin the *277 goods to Exfinco pursuant to this agreement the goods shall be insuch a state that the buyer would be bound to take delivery of them; (f) that the exporter shall not purport to accept Exfinco's offer topurchase goods from the exporter before the goods have been unconditionallyappropriated by the exporter on Exfinco's behalf to the contract of sale to abuyer bound to purchase them ..." Clause 7 contains complicated financial provisions which will have to beconsidered in relation to issue (2). But for present purposes it is relevant tonote that cl. 7(e) provides that: "Exfinco may at its discretion countercharge the exporter in respect of thebuyer's price of goods sold by the exporter on behalf of Exfinco withoutauthority and of goods as regards which the exporter was in breach of itsobligations under cl. 4, 5 or 6 hereof ..." Clause 8 provides for collection of receivables from buyers. The exporter isat its own expense to collect from buyers to whom it has sold goods on behalfof Exfinco pursuant to the master agreement the buyer's price thereof and tothat end is to instruct the buyers to pay all moneys due into bank accounts tobe opened by Exfinco in the name of the exporter, and on which only Exfincowill have power to draw. Under cl. 9 the exporter is not without the consent in writing of Exfinco todisclose to any buyer that it is acting as agent of Exfinco in connection withthe sale of goods to that buyer. Clause 10 contains extensive indemnities by the exporter to Exfinco,including, in subcl. (iii), an indemnity against all loss, damages expenses andcosts in connection with any breach of or failure by the exporter to complywith any of the conditions, warranties or obligations on its part to beperformed or complied with pursuant to the master agreement. Now it is clear law that the doctrine of subsequent ratification, in the lawof agency, only applies where the contracting party has expressly made acontract as agent for another. It does not apply where the contracting partyhas ostensibly made a contract as principal, without any hint of agency. Forthe doctrine of the undisclosed principal to apply, therefore, the authority ofthe agent to bind the undisclosed principal must exist at the time when theagent made the contract, ostensibly as principal. Only if that is so will theundisclosed principal be able to step in and enforce the contract against theother contracting party. So much is clear law. The Vice-Chancellor deduced from this, at p. 402H, that at the time acontract is made ostensibly between A and B it must be possible to say withcertainty (my emphasis) whether or not A is contracting on his own behalf or onbehalf of a third party X as his undisclosed principal. He therefore found a fundamental legal flaw in the master agreement on thefollowing lines: (1) by cl. 1 the exporter only had authority to sell as agent for Exfincogoods immediately thereafter agreed to be sold by the exporter to Exfinco, but (2) by cl. 2 Exfinco's offer only extended to goods which complied witheach of the warranties contained in cl. 5, and (3) goods would not comply with the warranty of fitness and merchantablequality in cl. 5(d) if there was at the moment of sale a latent defect of whichno one knew, and (4) therefore at the moment of the contract with the buyer it could not besaid with certainty of any floppy disc purportedly sold, whether it was or wasnot the subject *278 of Parrot's agency for Exfinco or of Exfinco's offer tobuy, because there might be a breach of warranty because of a latent defect. A similar argument could be founded, under cl. 1(a), 2(c) and 4, on thepossibility that unknown to everyone the relevant ECGD guarantee in respect ofa shipment was flawed by an innocent non-disclosure or misrepresentation of amaterial fact to the ECGD. In my judgment, however, the premise of the Vice-Chancellor, that it must bepossible to say with certainty at the time a contract is made with the overseasbuyer whether it is made by the exporter as principal or as agent for anundisclosed principal, has to be qualified by the well-known maxim, Id certumest quod certum reddi potest. As to the maxim, see May and Butcher Ltd v TheKing [1934] 2 KB 17n per Lord Dunedin at p. 21 and Sudbrook Trading Estate Ltdv Eggleton [1983] 1 AC 444 at p. 478C per Lord Diplock. The fact that there isor is not a latent defect in a shipment of goods can be discovered ex postfacto and does not depend on any further agreement between the parties.Therefore it does not matter to the validity of the master agreement that thatfact (or any similar fact) is not actually known to the parties at the momentwhen a contract is made by Parrot with an overseas buyer. The answer can beascertained by enquiry - if it is ever relevant to do so - and when it has beenascertained any possible uncertainty is removed. The master agreement itself envisages that any question as to theconsequences of there having been a breach of the warranty as to the fitnessand quality of the goods can be resolved by contra-charge under cl. 7(e) or byindemnity under cl. 10(iii). Therefore, with every respect to the Vice-Chancellor, I do not agree with hisconclusion on this issue, and I do not regard the master agreement ascontaining any fundamental legal flaw. I should add for clarity that I do not accept the argument of Mr Adkins,however persuasively put, that any difficulty over the interplay between cl. 1,2 and 5 is resolved by the provisions of cl. 3 as to acceptances. An acceptancecannot create an offer if there was none there before acceptance. I turn then to issue (2): were the transactions under the master agreement byway of sale or secured loan? It is not suggested that the master agreement was in any sense a sham or thatits terms did not represent the true agreement between the parties. Moreover itis not suggested in this case, as it was in Lloyds & Scottish, that in whatthey actually did the parties had departed from what was provided for by themaster agreement, and that therefore they ought to be treated as having madesome fresh agreement by conduct in the place of the master agreement. What is said is that in determining the legal categorisation of an agreementand its legal consequences the court looks at the substance of the transactionand not at the labels which the parties have chosen to put on it. This is trite law, but it is law which has fallen to be applied in differenttypes of cases where different factors are the relevant factors forconsideration. It is therefore not surprising that the words used by eminentjudges in different cases in applying the principle do not all fit veryharmoniously together. Thus the task of looking for the substance of the parties' agreement anddisregarding the labels they have used may arise in a case where their writtenagreement is a sham intended to mask their true agreement. The task of thecourts there is to discover by extrinsic evidence what their true agreement wasand to disregard, if inconsistent with the true agreement, the written words ofthe sham agreement. This is discussed in the judgments of Diplock and Russell LJJ in Snook v London and West Riding Investments Ltd [1967] 2 QB 786 *279 andis exemplified by some of the cases cited in Street v Mountford [1985] AC 809and A G Securities v Vaughan [1990] 1 AC 417 where in an endeavour to set up alicence to occupy, rather than a tenancy of, residential accommodation thelandlord had introduced into the agreement terms purportedly reserving tohimself a right to introduce further occupants which were plainly inconsistentwith the real intention. But the question can also arise where, without any question of sham, there issome objective criterion in law by which the court can test whether theagreement the parties have made does or does not fall into the legal categoryin which the parties have sought to place their agreement. One can see that inthe comments of Lord Templeman in Street v Mountford at p. 824 on the case ofShell-Mex and BP Ltd v Manchester Garages Ltd [1971] 1 WLR 612, where thedefendant had been allowed to use a petrol company's filling station for thepurposes of selling petrol, and the question was whether the transaction was alicence or a tenancy. Lord Templeman said that the agreement was only personalin its nature and therefore a licence if it did not confer the right toexclusive occupation of the filling station, since no other test fordistinguishing between a contractual tenancy and a contractual licence appearedto be understandable or workable. In the present case Mr Moss asserts for WDA that there are, on theauthorities, clearly laid down criteria for what is a charge, that all thosecriteria are present in the present case in the master agreement, and that themaster agreement is therefore necessarily as a matter of law a charge, whateverthe parties may have called it or thought it was. He relies in particular on the passage in the judgment of Romer LJ in ReGeorge Inglefield Ltd at p. 27 where Romer LJ sets out what he regarded as theessential differences between a transaction of sale and a transaction ofmortgage or charge. These were three, viz. (1) In a transaction of sale the vendor is not entitled to get back thesubject-matter of the sale by returning to the purchaser the money that haspassed between them. In the case of a mortgage or charge, the mortgagor isentitled, until he has been foreclosed, to get back the subject-matter of themortgage or charge by returning to the mortgagee the money that has passedbetween them. (2) If the mortgagee realises the subject-matter of the mortgage for a summore than sufficient to repay him, with interest and the costs, the money thathas passed between him and the mortgagor he has to account to the mortgagor forthe surplus. If the purchaser sells the subject-matter of the purchase, andrealises a profit, of course he has not got to account to the vendor for theprofit. (3) If the mortgagee realises the mortgaged property for a sum that isinsufficient to repay him the money that has been paid to the mortgagor,together with interest and costs, then the mortgagee is entitled to recoverfrom the mortgagor the balance of the money. If the purchaser were to resellthe purchased property at a price which was insufficient to recoup him themoney that he had paid to the vendor, he would not be entitled to recover thebalance from the vendor." But these indicia do not have the clarity of the distinction between atenancy and a licence to occupy, viz. that it must be a tenancy if the granteehas been given exclusive occupation of the property in question. In particularit is clear from Re George Inglefield Ltd and the Lloyds & Scottish case, (1) that there may be a sale of book debts, and not a charge, even thoughthe purchaser has recourse against the vendor to recover the shortfall if thedebtor fails to pay the debt in full, and *280 (2) that there may be a sale of book debts, even though the purchasermay have to make adjustments and payments to the vendor after the full amountsof the debts have been got in from the debtors. As to the latter see especially the judgment of Lord Hanworth MR in Re GeorgeInglefield Ltd at p. 20. In my judgment there is no one clear touchstone by which it can necessarilyand inevitably be said that a document which is not a sham and which isexpressed as an agreement for sale must necessarily, as a matter of law, amountto no more than the creation of a mortgage or charge on the property expressedto be sold. It is necessary therefore to look at the provisions in the masteragreement as a whole to decide whether in substance it amounts to an agreementfor the sale of goods or only to a mortgage or charge on goods and theirproceeds. In doing that I would in a case such as the present apply the law asstated by Lord Herschell in McEntire v Crossley Brothers Ltd [1895] AC 457where he said at pp. 462-463: "... I quite concede that the agreement must be regarded as a whole - itssubstance must be looked at. The parties cannot, by the insertion of any merewords, defeat the effect of the transaction as appearing from the whole of theagreement into which they have entered. If the words in one part of it point inone direction and the words in another part in another direction, you must lookat the agreement as a whole and see what its substantial effect is. But thereis no such thing, as seems to have been argued here, as looking at thesubstance, apart from looking at the language which the parties have used. Itis only by a study of the whole of the language that the substance can beascertained."In the same case Lord Watson said at p. 467: "As is usual in cases of this kind, we have heard a great deal in thecourse of the appellants' argument of the necessity of attending to thesubstance of the agreement which we have to construe. My Lords, that is a canonof construction which is applicable to all agreements; but it must always beborne in mind that the substance of the agreement must ultimately be found inthe language of the contract itself. The duty of a court is to examine everypart of the agreement, every stipulation which it contains, and to considertheir mutual bearing upon each other; but it is entirely beyond the function ofa court to discard the plain meaning of any term in the agreement unless therecan be found within its four corners other language and other stipulationswhich necessarily deprive such term of its primary significance." Having carried out such an examination, Lord Watson's conclusion was at p.468 that: "The whole stipulations of the agreement appear to me to be in entireconformity with the expressed intention of the parties." So in the Lloyds & Scottish case, which was concerned with the blockdiscounting of hire-purchase agreements under a master trading agreement whichwas cast in the form of an agreement for the sale of book debts, LordWilberforce said: "My Lords, the fact that the transaction consisted essentially in theprovision of finance and the similarity in result between a loan and a sale, toall of which I have drawn attention, gives to the appellants' arguments anundoubted force. It is only possible, in fact, to decide whether they arecorrect by paying close regard to what the precise contractual arrangementsbetween them and the respondents were." He then referred to "the contractual framework which the agreement set up"and considered whether a certain clause, particularly relied on by theappellants, "negated a purchase". Mr Moss submitted that in order to determine the substance of the masteragreement without regard to the labels which the parties had put on it, thecourt should consider *281 what rights and obligations the master agreement hadcreated - e.g. to receive or pay money or to dispatch goods or render invoices- without regard to any words in the master agreement such as "sell" or"purchase" or "price" which were mere labels. But Mr Moss's submission is not,in my judgment, in accordance with the authorities to which I have referred, ina case where there is no question of sham. Indeed the similarity in resultbetween a loan and a sale to which Lord Wilberforce referred would make itvirtually impossible to decide which the transaction was if it was notpermissible to have regard to the words the parties had used in their agreementin describing that transaction on which they had agreed. There is nothingillegal in a party raising finance by a sale of book debts or goods, ratherthan by a mortgage or charge, if he chooses to do so. The Vice-Chancellor, as I understand his judgment, adopted the approach tothe present question which, as I have endeavoured to indicate, I consider to becorrect. The question for us is whether he applied that approach correctly. Headdressed himself to whether certain provisions on which the WDA particularlyrelied were inconsistent with the master agreement being in substance, and asit purported to be, a sale. Those provisions he examined in turn under theheadings: "The price", "The discount", "The right of retention", and "The rightof redemption". His conclusion was that certain of these provisions - those considered underthe headings "The right of redemption" and "The discount" - were inconsistentwith the master agreement being an agreement for sale. In effect they negated asale, and so the substance of the master agreement had to be no more than anagreement for a charge or charges on goods or their proceeds. In considering the right of retention, however, he was asked to look, not fora charge on the goods to be sold by Parrot to the overseas buyers or on theright to the purchase moneys payable by the overseas buyers for those goods,but for a charge on the "price" payable by Exfinco to Parrot under the masteragreement itself. Here he faced the difficulty, sitting at first instance, thatthe provisions as to the right of retention were in his view indistinguishablefrom very similar provisions in the case of Re Charge Card Services Ltd (No. 2)[1987] Ch 150; (1986) 2 BCC 99,373, which Millett J held in that case did notcreate a charge. The Vice-Chancellor expressed reservations over the reasoningof Millett J which led him to that conclusion, and in this court thecorrectness of the decision in Re Charge Card Services has been raised by MrMoss by a respondent's notice. I find the provisions of the master agreement in respect of the price, thediscount and the right of retention so closely interrelated that it isnecessary to take them together. The provisions as to the price are to be found in cl. 7 of the masteragreement, which is headed "Financial provisions". Under cl. 12 of the masteragreement it is stated that in the event of any ambiguity or discrepancybetween the terms of the master agreement and the operating procedures, themaster agreement shall prevail, but various provisions in cl. 7 are to becarried out in accordance with the operating procedures or subject to theprovisions in the operating procedures. Moreover it is common ground that inpractice the definition of "the exporter's price" in the glossary in theoperating procedures has to be preferred to that in cl. 7(a) of the masteragreement. The discount, or Exfinco discount, is provided for by the operatingprocedures, as are discount adjustments. The right of retention is a name givenin argument to the effect of subcl. 7(c) of the master agreement and the rightto contra-charge under subcl. 7(e) (which I have already mentioned) in arrivingat the amount to be actually paid to Parrot under subcl. (7)(d). The provisionsare very complex, but their effect is summarised with sufficient accuracy forpresent purposes in the following paragraphs, (1)-(10), which I take from pp.397-399 of the Vice-Chancellor's judgment, subject to the qualification thatthe goods purchased accounts and client's accounts referred to, which arerequired to be maintained *282 under cl. 7(c) of the master agreement, aremerely, as I understand it, entries on Exfinco's computer system for purposesof calculation. (1) The "buyer's price" is defined as the price at which the exporterinvoices the goods to the buyer. (2) The "exporter's price" is defined as the buyer's price less, first, theamount not covered by ECGD guarantee (usually ten per cent) and, second, theExfinco discount. (3) The "Exfinco discount" is calculated by applying Exfinco's rate ofinterest to the average credit period (ACP). The ACP is the average period overwhich all overseas buyers from the exporter take to pay their debts: it is avarying period regularly recalculated by Exfinco. (4) Exfinco keeps two accounts for each currency used by the exporter, agoods purchased account and a client account. These accounts contain theentries relating to all transactions by the exporter in that currency with allits buyers in that currency. (5) On acceptance of Exfinco's offer to buy the goods (e.g. by the exportersending to Exfinco the invoices or schedule) the goods purchased account iscredited with the buyer's price (i.e. 100 per cent of the price payable by thebuyer). The goods purchased account is debited (by transfer to client account)with the same amount in relation to each transaction, such credit being made atthe expiry of the ACP applicable to that transaction. (6) On acceptance of the offer by the exporter, Exfinco pays the exporterthe exporter's price (i.e. 90 per cent of the price payable by the buyer lessthe Exfinco discount calculated on the basis that Exfinco will be out of itsmoney for the ACP). There may also be further deductions from the payment: see(9) and (10) below. The amount so paid to the exporter is debited against theclient account as is the amount of the Exfinco discount. (7) There is credited or debited monthly to client account a sum called"the discount adjustment". The amount is calculated daily by applying Exfinco'srate of discount to the net balance on the accounts to which payments from allbuyers are credited and against which the sums transferred to client accountare debited. The result, as I understood it, was as follows: if all the buyers(taken together) had paid earlier than the ACP, there would be credited toclient account the sum representing the amount by which the original discounthad been based on an over calculation of the period during which Exfinco wasactually out of its money. If, on the other hand, all the buyers taken togetherhad paid later than the ACP, there would be debited against the client accounta sum representing the amount by which Exfinco had under calculated the time itwould be out of its money. (8) On the expiry of the ACP, the client account is credited with thebuyer's price (i.e. 100 per cent of the price payable by the overseas buyer):see (5) above. Accordingly, if one ignores all other factors, at that stage theexporter will have either received or been credited with not only the 90 percent of the buyer's price (less Exfinco's discount) paid initially (see (6)above) but also the remaining ten per cent of the buyer's price, i.e. theexporter will have received or been credited with more than the amount definedin the documents as being "the exporter's price". (9) A number of other items are also debited against the client account.The client account deals with all transactions carried out by the exporterunder the master agreement in the relevant currency. At any given time,therefore, there will be a number of different transactions giving rise todebits and credits to client account. Amongst the other items to be debitedagainst client account are credit notes *283 issued by the exporter, chargeslevied by bankers on the remission of money by the buyers and unresolveddisputed amounts. Accordingly, at any given time, the net balance on clientaccount will not represent individually the amounts credited and debited toclient account on any single transaction by itself but will reflect, by way ofdebits, claims which Exfinco has against the exporter in relation to othertransactions. It follows that, in commercial terms, Exfinco has the right todischarge out of the price payable to the exporter on any individual "purchase"of goods by Exfinco liabilities arising out of wholly different "purchases"under the master agreement. (10) Exfinco is only bound to pay to the exporter the amount by which thesum of goods purchased account and the client account exceeds ten per cent ofthe goods purchased account. In the operating procedures this is described as"our retention". Its effect is that at all times Exfinco has a reserve of tenper cent out of which to meet future obligations of the exporter in relation toall transactions by that exporter under the master agreement. The Vice-Chancellor commented, at the end of the section of his judgmentdealing with the price, that these arrangements make much more sense if thesubstance of the transaction is not a sale of goods but an assignment of bookdebts. If however the transaction is, as it sets out to be under the masteragreement, a sale of goods which have been unconditionally appropriated byParrot to a contract to be made immediately afterwards by Parrot for their saleto an overseas buyer, the price to be paid by Exfinco to Parrot for the goodswill necessarily relate, as under the master agreement, to the price payable bythe overseas buyer with appropriate discounts. There is nothing in this to makeit more likely that the substance of the transaction is a charge on goodsrather than a sale of goods or a charge on the proceeds of sale of goods ratherthan a sale of book debts arising from the sale of goods. The essence of the transaction when a trader raises finance by factoring bookdebts or block discounting hire-purchase agreements is that the trader sellsthe book debts to a finance company for a price which is necessarily discountedfrom the full aggregate face value of the debts. It is discounted, primarily,because the trader will be getting an immediate payment, while the financecompany will have to wait for the debts to come in from the debtors and theymay well not be presently payable. Indeed with hire-purchase agreements thedebt will be payable by the hirer by instalments over what may be aconsiderable period. The rate of discount will also no doubt take into accountthe risk the finance company is assuming that the debtor will fail to pay thedebts; but in the present case that risk is covered as to 90 per cent by theECGD guarantee. It is normal, therefore, that the rate of discount for the finance companywill be calculated by reference to the appropriate rate of interest for theperiod for which the finance company is out of its money. It has been normalfor the amount of discount to be calculated once and for all; it will beactually received by the finance company when the finance company receivespayment of the book debt from the debtor, or from the vendor under rights ofrecourse for the finance company against the vendor. If the vendor hasguaranteed to the finance company that the debtor will pay the debt punctually,and the debtor does not pay punctually, it may well be that the finance companycould claim damages from the vendor, to be measured by a computation ofinterest over the period for which it has been kept out of its money in excessof the period on which the calculation of the amount of the finance company'sdiscount was based. The classic exposition by Lord Devlin in Chow Yoong Hong v Choong Fah RubberManufactory [1962] AC 209 at p. 217 of the difference between interest anddiscounts is as follows: *284 "When payment is made before due date at a discount, the amount of thediscount is no doubt often calculated by reference to the amount of interestwhich the payer calculates his money would have earned if he had deferredpayment to the due date. But that does not mean that discount is the same asinterest. Interest postulates the making of a loan and then it runs from day today until repayment of the loan, its total depending on the length of the loan.Discount is a deduction from the price fixed once and for all at the time ofpayment." (emphasis supplied) Lord Wilberforce made a statement to the same effect -- that discount isfixed and paid once and for all whereas interest accrues from day to day - inthe Lloyds & Scottish case after citing from Lord Devlin's opinion in ChowYoong Hong. Lord Wilberforce also referred to statements in Willingale(Inspector of Taxes) v International Commercial Bank Ltd [1978] AC 834 by LordSalmon at p. 841H and by Lord Fraser of Tullybelton at p. 843E to the effectthat, unlike interest, discount is not earned and does not accrue fromday-to-day. The difficulty raised under the heading "The discount" in the present case isthat Exfinco's discount is not fixed once and for all, but is subject toadjustment as explained in the heading "Discount adjustments" in the operatingprocedures; this relates, as set out in para. 7 of the Vice-Chancellor'sexplanation of the financial provisions, to whether, on average, buyers havepaid more speedily or more slowly than was assumed in calculating the ACP oraverage credit period on which the Exfinco discount was calculated. In brief ina long running agreement which ran from 1985-89 the discount calculated on anassumed credit period is adjusted in the light of the actual credit periodsbeing taken. But even if the adjustments in line with actuality are made fromday to day that does not, in my judgment, convert the Exfinco discount intointerest on a loan and it does not negate the transaction being one of sale andpurchase. As for the right of retention, that does not, in my judgment, differ insubstance from the 25 per cent reserve and "topping up process" which therespondents in the Lloyds & Scottish case required, as explained by LordWilberforce, or from the adjustment provisions referred to by Lord Hanworth inRe George Inglefield Ltd at p. 20. There is nothing in these matters, takenindividually or together, to negate the transaction being one of sale andpurchase. So far as the decision in Re Charge Card Services Ltd is concerned, I havevery considerable difficulty with the view expressed by Millett J at p. 175C-D;99,391 that a book debt due to the company (Charge Card Services Ltd) fromCommercial Credit could not be charged in favour of Commercial Credit itselfbecause a charge in favour of a debtor of his own indebtedness to the chargoris conceptually impossible. I see no basis for this conclusion in the judgmentof Millett J himself. I see no reason why the transaction which took place inEx parte Mackay (1873) LR 8 Ch App 643 (better reported in 42 LJ (NS)Bankruptcy 68) and was upheld by this court - viz. that a creditor who wasentitled to royalties from a debtor but was also indebted to the debtor in asum by way of loan bearing interest could give the debtor a continuing right,which would subsist as security despite the bankruptcy of the creditor, toapply half the royalties in reduction of the loan and interest - should not bevalid in law. The same applies to the auctioneer's lien on his client's moneysin his hands which was upheld in Webb v Smith (1885) 30 ChD 192. However, I donot see that this arises in the present case. The observations to which we were referred of Lord Denning MR and Buckley LJin this court and of members of the House of Lords on further appeal inNational Westminster Bank Ltd v Halesowen Presswork & Assemblies Ltd [1971] 1QB 1 and [1972] AC 785 are, in my judgment, directed to a different situation,viz. that the so-called banker's lien, where a customer had several accountswith a bank, was more accurately to be described as a right of the banker tocombine accounts because there *285 was only one banker and customerrelationship, that the banker's right to combine accounts might be suspended byexpress or implied agreement with the customer but that, on the view whichprevailed, an implied agreement to suspend the right automatically came to anend when the customer ceased trading and went into liquidation. None of thathas any relevance to the present case. In the present case the right of retention arises because running accountswere to be kept by computer of all financial aspects of the dealings betweenParrot and Exfinco under the master agreement, and the actual payments toParrot of "the exporter's price" were to be adjusted in consequence. I do notsee how that, in the context, amounts to a charge in favour of Exfinco onParrot's right to the exporter's price. But even if it does amount to such acharge, it casts no light at all, in my judgment, on the nature of theunderlying transaction, and does not indicate at all that the exporter's priceis in truth a loan by Exfinco to Parrot and not the price of goods sold byParrot to Exfinco. From the nature of the dealings in goods between Parrot, inwhatever capacity, and the overseas buyers, the running accounts and theconsequent adjustments would be required whatever the substance or the truenature of the contract between Exfinco and Parrot. I come finally on this question to the aspect which has been called "theright of redemption", to which, as I read his judgment, the Vice-Chancellorattached the greatest importance. This arises under cl. 11 of the master agreement, which has the cross-heading"Termination". Under subcl. (a) Exfinco is given a right of summary terminationin specified events such as the liquidation of the exporter or the appointmentof a receiver. Under subcl. (b) either party is given the right to terminatethe master agreement by giving not less than three months' notice in writing tothe other party. Then by subcl. (c) it is provided that: "Upon the termination of this agreement the exporter shall forthwith pay toExfinco the amounts required to be paid on termination pursuant to theoperating procedures."By cl. 9 of the operating procedures it is provided as follows: "9.1 Upon termination of the 'master agreement' all amounts owed to Exfincoby the buyers (referred to as the balance outstanding) shall become immediatelydue for payment by you to Exfinco. 9.2 When cleared funds are received by Exfinco from you extinguishing allamounts due to us, all interests and benefits we have in the ' goods' or thedebts is relinquished in your in favour and ECGD will be advised accordingly. 9.3 Any payments received into the collection accounts after we have beenfully repaid will be refunded to you." Clause 9 of the operating procedures is plainly drawn on the basis thatmoneys are owed to Exfinco by the buyers because Exfinco was the undisclosedprincipal of Parrot when the goods were sold to the overseas buyers. It is nottherefore inconsistent with the master agreement being, as it purports to be,an agreement for the sale of goods to Exfinco under a standing offer, and notan agreement for Exfinco to make loans to Parrot on the security of goods orbook debts of Parrot. If however Parrot pays the balance outstanding under cl. 9.1 of the operatingprocedures (which imposes a more immediate liability on Parrot to make paymentthan the right of recourse afforded to Exfinco by cl. 8(a) and 10(iii) of themaster agreement) Parrot will get back the right as against the buyers to allunpaid moneys under the sale agreements, whether already in arrears or not yetpayable, and also the property in the goods sold, until payment of the price infull by the buyer. To that extent cl. 11 can be said to give Parrot a right of"redemption"; but there is no redemption so far as regards *286 goods for whichExfinco has been paid in full by the buyers, and the property in which hastherefore vested in the buyers. The crux of this point, as I see it, is that the parties were entitled tochoose the way in which Parrot would raise finance. There was nothing illegalabout it. It could be raised either by borrowing or by the sale of assets,whether goods or book debts. But there was a disadvantage in borrowing that ifthe finance was raised by borrowing secured by a charge which was registrableunder the Companies Act, but was not registered, the charge would be void asmentioned above. In this position, the following passage in the speech of Lord Wilberforce inthe Lloyds & Scottish case ((1979) 129 NLJ 366 at p. 372) is, in my judgment,clearly applicable: "To suppose, in the face of this, that the assignments were made not by wayof sale but by way of security, would be to impose upon the parties a form oftransaction totally different from that which they had selected - namely one ofsale, and which there is no evidence whatever that either of them desired.Indeed there was evidence - uncontradicted - from the respondents' witnessesand accepted by both courts below that the respondents 'had no intention ofcreating any charge over book debts or merely making a series of loans'. Itwould be a strange doctrine of 'looking for the substance' or 'looking throughthe documents' which would produce a contractual intention so clearly negatedby the documents and by oral evidence." Even the "right of redemption" is not inconsistent with the transaction beingone of sale. Taking all factors urged in favour of the master agreement beingheld to be, in substance, merely an agreement for secured loans, I wouldnonetheless hold that it is valid as what it purports to be, namely, anagreement for the sale by Parrot to Exfinco, by acceptance of a standing offer,of goods about to be sold by Parrot to overseas buyers. It follows that it is not necessary for this court to decide whether, if themaster agreement was not an agreement for sale but an agreement for securedloans, the security ought to have been registered under the Companies Act. Thisterritory is bedevilled by law that is now very out of date, involvingconsideration whether a charge would, if created by an individual, have beenregistrable as a bill of sale under the Bills of Sale Act (1878) Amendment Act1882. The Vice-Chancellor considered that the master agreement would itselfhave been registrable under the Companies Act as a charge, notwithstanding adictum of Lord Macnaghten in Thomas v Kelly (1888) 13 App Cas 506 at p. 519(supported, so far as I can see, by Lord Halsbury LC at p. 512) that thedefinition of "personal chattels" in the Bills of Sales Act seemed to excludefuture or after-acquired chattels. But the Vice-Chancellor also held that eachacceptance by Parrot under cl. 3 of the standing offer created a separateregistrable charge on presently ascertained goods, and I have not heard anyeffective answer to that from Mr Crystal. It is also unnecessary to consider Mr Crystal's submissions on what wasreferred to as "the intervention point", namely that, even if the masteragreement and the acceptances under it merely created charges which should havebeen registered under the Companies Act and were void as against WDA fornon-registration, Exfinco is entitled to retain the moneys which came into thedesignated accounts under cl. 8 of the master agreement after Exfinco hadnotice of the appointment of the receivers and before a consent order was madein these proceedings in August 1989. Exfinco is in my judgment entitled, aspurchaser under the master agreement, to all the moneys paid into thedesignated accounts by the overseas buyers before or after the appointment ofthe receivers, and is also entitled to the moneys got in by the receivers fromthe overseas buyers after the receivers' appointment, since these moneys werethe proceeds of goods sold by Parrot as agent for Exfinco under the masteragreement. It remains to consider Exfinco's counterclaim against the receivers. *287 The basis of that is that after their appointment the receivers, inaccordance with counsel's advice, wrote to the overseas buyers telling them topay all outstanding moneys to the receivers' bank accounts, and cancelling theprevious instructions to pay into the accounts which had been designated undercl. 8 of the master agreement. In the result some buyers did make payments to the receivers and others paidto the previously designated accounts. With both of those lots of money I havealready dealt. Others however have made no payments at all, and it is said by Exfinco thatthat is because the receivers had (ex hypothesi, on my judgment, wrongly)interfered with the existing contractual relations by giving conflictinginstructions to the buyers. The receivers, through Mr Moss, put forward two grounds on which they saythat they cannot be liable for the tort of wrongful interference with thecontractual relations. In the first place, they rely on the special protection conferred onadministrative receivers, among others, by sec. 234(3) and (4) of theInsolvency Act 1986. In the second place, they say that in writing the letters in question to thebuyers, the receivers were, both under the terms of the WDA debenture and undersec. 44(1)(a) of the Insolvency Act 1986 acting as agents of Parrot, and theytherefore claimed to rely on a doctrine first enunciated by McCardie J in Saidv Butt [1920] 3 KB 497 that a servant or agent who, acting bona fide within thescope of his authority, procures the breach of a contract between his employeror principal and a third party is not liable to an action of tort at the suitof that third party for wrongful interference with contract. I am firmly of the view that the first of these grounds does not avail thereceivers. Subsection (3) and (4) of sec. 234 provide so far as material as follows: "(3) Where the officer-holder [which includes an administrative receiver]- (a) seizes or disposes of any property which is not property of thecompany, and (b) at the time of seizure or disposal believes, and has reasonablegrounds for believing, that he is entitled (whether in pursuance of an order ofthe court or otherwise) to seize or dispose of that property, the next subsection has effect. (4) In that case the officer-holder- (a) is not liable to any person in respect of any loss or damage resultingfrom the seizure or disposal except in so far as that loss or damage is causedby the office-holder's ownnegligence ..." The only legislative antecedent of those provisions to which we have beenreferred is sec. 61 of the Bankruptcy Act 1914. That applied in bankruptcy, buthad no counterpart in companies liquidation or receivership. It only appliedwhere the official receiver or trustee had seized or disposed of any goods,property or other effects in the possession or on the premises of a debtoragainst whom a receiving order had been made. It could not therefore haveapplied to choses in action. The counterparts of that in modern bankruptcy laware in sec. 287(4) and 304(3) of the 1986 Act. It must be, therefore, that in enacting sec. 234(3) and (4) of the 1986 ActParliament intended to change the law, at least to extend the remedy under sec.61 to companies liquidation and receivership. Moreover the words used in sec.234(3) and (4) are "any property", rather than the formula in sec. 61, and"property" by sec. 436 of the 1986 Act is given an extremely wide meaning,which would amply cover choses in action, "except in so far as the contextotherwise requires". But subsec. (3) and (4) repeat the word "seized" which was used in sec. 61and is in its natural sense only applicable to tangible property and not tochoses in action. Beyond *288 that, sec. 234(2) enables the court to giverelief "Where any person has in his possession or control any property, books,papers or records to which the company appears to be entitled"; that againappears at least primarily to be dealing with tangible property only. In my judgment, the references in sec. 234(3) and (4) to seizing propertyonly apply to tangible property, and do not apply to choses in action. Beyond that, the receivers face the difficulty that the claim against them isin respect of the moneys which they have not got in at all-the moneys which theoverseas buyers have not paid to anyone. I fail to see how a receiver can besaid to have "seized" a chose in action which he has not got in and has notdisposed of to anyone else. The receivers' second ground for contending that in law they cannot be liablefor wrongful interference with contract raises an issue of greater difficulty. In Said v Butt the managing director of a theatre company was sued fordamages for maliciously procuring the company to break its contract with theplaintiff by refusing to allow the plaintiff to enter the theatre for a firstnight performance although he held a ticket for that performance. The actionfailed because the theatre company had been deceived as to the real person withwhom it was contracting in selling the ticket to a person who was in truth theplaintiff's agent; therefore there could be no liability on the defendant forprocuring the breach of a contract which the company was entitled to avoid. But McCardie J then proceeded to set out in his judgment an alternative lineof reasoning that led to the same conclusion. At the end of his judgment, heaccepted, at the foot of p. 506, that, "a director or a servant who actually takes part in or actually authorizessuch torts as assault, trespass to property, nuisance, or the like may beliable in damages as a joint participant in one of such recognized heads oftortious wrong." Thus in cases of motor accidents allegedly caused by negligent driving it iscommon to join as defendants both the driver who is said to have been negligentand his employer, as vicariously liable. So in cases of trespass to land, ornuisance affecting the enjoyment of land, it is a recognised course to join asdefendant both the agent who committed the trespass or caused the nuisance andthe principal who directed him to do so. In the particular field ofinterference with contract, however, McCardie J concluded, at p. 506, that: "... if a servant acting bona fide within the scope of his authorityprocures or causes the breach of a contract between his employer and a thirdperson, he does not thereby become liable to an action of tort at the suit ofthe person whose contract has thereby been broken." His reasoning seems to have been (1) (at p. 505) that there is no case in thebooks which indicates that a servant is liable in tort for procuring a breachof his master's contract with another, (2) (at p. 504) that the gravest andwidest consequences would follow if the servant was so liable, and moreimportantly (3) (at the foot of p. 505) that the acts of the servant are in lawthe acts of his employer. No. (3), though true, does not automatically carrythe general corollary that the acts of the servant are not also his own acts,if tortious; the point is limited to interference with contract, on the basisthat if the acts of the servant are in law the acts of the master, there can beno liability in tort because the master cannot be guilty of wrongfullyinterfering with, or procuring a breach of, his own contract with a thirdparty. McCardie J's conclusion was accepted by the majority in this court, Greer andSankey L JJ in G Scammell and Nephew Ltd v Hurley [1929] 1 KB 419; see at pp.443 and 449. The actual decision of the court in that case was that the acts ofthe defendants were within the protection of the Public Authorities ProtectionAct 1893 and the action *289 against them therefore failed, as brought outsidethe time limit prescribed by that Act. There was the further point discussedthat the defendants, who were members of a committee of the Stepney BoroughCouncil, had been exercising statutory functions properly delegated to them bythe council, in respect of which, even apart from the time limit, no action fordamages would have lain against the council, because the powers and duties werestatutory; it was in that context that Said v Butt was mentioned, and theacceptance of what McCardie J had said must, in my judgment, have been obiterand not binding on us. But Said v Butt is also referred to by Evershed MR in DC Thomson & Co Ltd v Deakin [1952] Ch 646 at pp. 680-681 where he treats it ashaving been approved by this court in Scammell & Nephew Ltd v Hurley. He alsosets out the justification of the decision in Winfield's Law of Tort (5th ed.),where it is said: "If my servant acting bona fide within the scope of his authority, procuresor causes me to break a contract that I have made with you, you cannot sue theservant for interference with the contract; for he is my alter ego and I cannotbe sued for inducing myself to break a contract." On the same basis, it is treated as good law in Clerk & Lindsell on Torts(16th ed.) at p. 811. It has also been applied as good law in the High Court ofAustralia in O'Brien v Dawson (1942) 66 CLR 18 per Starke J at p. 32 and perMcTiernan J at p. 34, in the Court of Appeal in Victoria in Rutherford v Poole[1953] VLR 130 at pp. 135-136 and in the Supreme Court of New Zealand inOfficial Assignee v Dowling [1964] NZLR 578 at pp.580-581. Said v Butt is also mentioned by Peter Gibson J in Telemetrix plc v ModernEngineers of Bristol (Holdings) plc (1985) 1 BCC 99,417 at p. 99,420 asauthority that a pure agent cannot be liable in an action for interference withcontractual relationships where the agent is an agent of one of the contractingparties. The judgment of Peter Gibson J seems to suggest a query whether thatprinciple can apply to a receiver and manager who enjoys a rather unusual kindof agency. But that distinction was not, as I understand him, relied on by MrCrystal, and, in my judgment, rightly so, since the whole object of thepractice of constituting a receiver the agent of the mortgagor was, asexplained by Rigby LJ in the well-known passage in Gaskell v Gosling [1896] 1QB 669 at pp. 691-693, to give protection to the receiver and the mortgagee ordebenture holder and the respects in which the receiver's position differs fromthat of an ordinary agent lead to his having greater power to interfere withimmunity, in furtherance of his duty to the mortgagee or debenture holder, withexisting contracts of the mortgagor. Thus in exercise of the powers given tohim by the debenture a receiver can, without incurring any tortious liabilityfor interference with contracts, close down the mortgagor company's businessnotwithstanding that he thereby causes the company to break its contracts madebefore the receivers' appointment e.g. with customers who have placed orders,and paid deposits on the orders, for goods which have not yet been supplied.Equally if he carries on the company's business with a view to its realisationbe will not pay unsecured debts, ranking behind the debenture e.g. to suppliersfor materials supplied to the company before the receivers' appointment. Personally, I have grave reservations over the reasoning of McCardie J inSaid v Butt. Since the agent or employee is normally personally liable for anytortious acts he does to third parties in the course of his agency oremployment, I would not find any conceptual difficulty in holding that anemployee or agent who, in the course of his employment or agency, wrongfullycauses a breach of a contract between his employer or principal and a thirdparty is liable in tort to the third party for his tortious act of wrongfullycausing a breach of contract, notwithstanding that the liability of hisemployer or principal for the agent's wrongful acts lies in breach of contractrather than in tort. *290 But the reasoning and conclusions of McCardie J have stood for so longand been so widely accepted that it is not for this court, in my judgment, tointerfere with that. Mr Crystal's counter to the argument founded on Said v Butt was to submitthat the contract with which the receivers had wrongfully interfered was thecontract between Exfinco and the overseas buyer, to which Parrot was not aparty. In my judgment, however, the contract with which the receiversinterfered was the contract between Parrot and Exfinco, namely, the masteragreement and particularly cl. 8. The receivers' directions to the overseas buyers involved no breach of thecontracts between Parrot and the overseas buyers, regarded apart from themaster agreement; the overseas buyers were merely told by the receivers, asagents for Parrot, to pay into the receivers' account rather than into theaccounts previously designated by Parrot which as far as the buyers knew wereParrot's accounts, and stood in Parrot's name. As for the contract between Exfinco and the overseas buyer, of the existenceof which the overseas buyer was unaware, the position of an undisclosedprincipal has long been regarded as anomalous; see the discussion in Bowsteadon Agency (15th ed.) at pp.341-343. I do not regard it as having the effect ofcreating a contractual relationship between the undisclosed principal and, inthis case, the overseas buyer, which is separate from the subsistingcontractual relationship between the agent, Parrot, and the overseas buyer.Exfinco's right was to intervene and enforce against the overseas buyer thevery contract which Parrot had made with the buyer. But Exfinco had stipulated in the master agreement that its interest was notto be disclosed to the overseas buyers, and so far as we know that stipulationhad been observed and the overseas buyers had all supposed that they werebuying from Parrot as a principal. Therefore, so far as the overseas buyerswere concerned, Exfinco was bound to accept any directions as to payment whichParrot gave to the overseas buyers, albeit in breach of cl. 8 of the masteragreement. There was no breach by the buyers. There was flagrant breach orinterference by the receivers with cl. 8 of the master agreement but I cannotsee that there was also interference by the receivers with a separate contractby Exfinco to which Parrot was not a party. Accordingly, the counterclaim of Exfinco against the receivers should, in myjudgment, be dismissed on the ground that in writing the letters to theoverseas buyers, of which complaint is made, the receivers were acting asagents for Parrot, as appears on the face of the letters, and so cannot beliable for the tort of wrongful interference with any contract previously madeby Parrot.Ralph Gibson LJ: The Vice-Chancellor found in the master agreement a fundamental legal flaw(see [1990] BCC 393 at p. 402E). In his view, cl. 1 only constituted Parrot asthe agent of Exfinco in relation to goods "immediately thereafter agreed to besold ... to Exfinco". It followed that, unless any parcel of goods was thesubject-matter of Exfinco's offer to buy in cl. 2, those goods would be sold byParrot not as agent for Exfinco but as principal, since Parrot had no authorityto sell them as agent. Clause 2(d) expressly excluded from Exfinco's offer tobuy, any goods which did not comply with the warranties in cl. 5 (including,for example, in cl. 5(d) "that the goods shall be of merchantable quality andfit for the purpose for which they are intended for use by the buyer"). Inrelation to any given parcel of floppy discs therefore, sold by Parrot to anoverseas buyer, if a latent defect were subsequently to emerge there would bebreach of the cl. 5(d) warranty and, therefore, there would have been no offerby Exfinco to buy the goods and no authority in Parrot to sell the goods onbehalf of Exfinco. Since it was, therefore, not possible at the time ofcontract to say who were the parties, i.e. Parrot as vendor or Exfinco asvendor as undisclosed principal, the Vice-Chancellor concluded that thecontract must in each case be treated as made between Parrot and the overseas*291 buyer without enquiry as to whether all or any of the contracts were infact made within the authority apparently intended to be given by the terms ofthe master agreement. The Vice-Chancellor (at p. 403C) did not understand Mr Crystal to take issuewith any of the steps of the reasoning which led to that conclusion if effectwas properly to be given to what the Vice-Chancellor referred to as the literalwording of the master agreement. There appears to have been somemisunderstanding with reference to Mr Crystal's submissions. Mr Moss has notsuggested that it is not open to Exfinco to contest that conclusion on anyground. On behalf of Exfinco it was argued before the Vice-Chancellor that the masteragreement, as a commercial document, should be read as conferring much widerauthority on Parrot to sell as agent for Exfinco than the "literal wording" hadrevealed to the Vice-Chancellor. The Vice-Chancellor rejected that submissionon the grounds that the master agreement was very far from being a layman'sdocument prepared by businessmen for ordinary business purposes but was (at p.403F), "a most skilfully drawn lawyer's document ... designed ... to cast in themould of agency and sale an agreement which, in commercial terms, is afinancing agreement equally capable of being explained as one by way of securedloan." The Vice-Chancellor, therefore, declined on this issue to do other than to"give effect to the legal nature of the transaction as expressed in the legalterms used". In this court, there was advanced by Mr Adkins on behalf ofExfinco a detailed argument in support of the same submission, i.e. that themaster agreement should be read as conferring a wider authority on Parrot tosell as agent for Exfinco. The first stage of the argument, which is criticalto its validity, was directed to the agreement to sell by Parrot to theoverseas buyer as agent for Exfinco as undisclosed principal. It was contendedthat, on the true construction of cl. 1 of the master agreement, the authorityto agree to sell goods to any buyer was not limited by the words "immediatelythereafter agreed to be sold by (Parrot) to Exfinco pursuant to thisagreement". Those words were, it was said, a description of the next step whichwould follow under the terms of the master agreement under the standing offerby Exfinco to buy goods from Parrot for future resale by Parrot to the buyer asagent for Exfinco. The words in cl. 1 were not, it was said, a description ofthe class of goods which Parrot was authorised to sell on behalf of Exfinco. That construction was said to be supported by other terms of the masteragreement including what was said to be the clear and otherwise unnecessarydistinction drawn in the standing offer in cl. 2 between the limitations insubcl. (c): "this offer does not extend to any goods which (Parrot) are not authorisedby cl. 1 hereof to agree on behalf of Exfinco to sell to a buyer ..."-and the limitation in subcl. (d): "this offer extends to goods which comply with each of the warrantiescontained in cl. 5 ..."It was said to be apparent that the standing offer contemplated that Parrot wasauthorised by cl. 1 to sell goods which did not comply with the warranties incl. 5. Next it was argued by Mr Adkins that that construction was supported by thepresence in the master agreement of other provisions, namely: (1) the proviso (h) to cl. 1 to the effect that Parrot would have noauthority, "to enter into any agreement with a buyer on terms or in a manner thatprejudices or affects the rights or remedies of Exfinco as undisclosedprincipal and in particular (but without limitation) its ability to enforcerights against the buyer"; *292 (2) the provision in the recitals to the master agreement to theeffect that Parrot had agreed to act as agent for Exfinco for the purpose ofsales of goods by Parrot on behalf of Exfinco to buyers; and (3) by the proviso to cl. 5 (at the end of the list of warranties theregiven in relation to every agreement to sell goods to Exfinco under cl. 2 and3) by which Parrot undertook with Exfinco that, during the term of the masteragreement, Parrot would not (except with the prior consent of Exfinco) sellgoods to any buyer otherwise than on behalf of Exfinco pursuant to the terms ofthis agreement. Finally, the court was invited to apply the wider construction of Parrot'sauthority on the ground that Parrot, as agent, had bona fide adopted and actedupon that wider construction and Exfinco could not have repudiated Parrot'sauthority. Reference was made to art. 39 of Bowstead on Agency (15th ed.): "Where the principal's instructions are ambiguous ... if the agent fairlyand honestly assumes them to bear one of those interpretations and actsaccordingly, he will not be in breach of contract by so acting." On this part of the case the Vice-Chancellor was, in my judgment, correct inhis construction of cl. 1 of the master agreement. The words show that Parrotwas to have authority on behalf of Exfinco to agree to sell to a buyer suchgoods as would immediately thereafter be agreed to be sold by Parrot to Exfincopursuant to the agreement. Nothing, in my view, provides authority to Parrot toagree to sell on behalf of Exfinco any other goods. If goods are agreed to besold by Parrot to a buyer which do not fall within the class of goods describedin cl. 2 then, in my judgment, the standing offer does not extend to them:thus, in cl. 2(d) "this offer extends only to goods which comply with each ofthe warranties contained in cl. 5". I cannot see that the proviso to, or finalclause of, cl. 5 has any relevant effect. That says that Parrot "will not(except with the prior consent of Exfinco) sell goods to any buyer otherwisethan on behalf of Exfinco pursuant to the terms of this agreement". Those wordswould cause Parrot to be in breach of that provision if Parrot did sell goodsto a buyer without the authority of Exfinco but the provision could not conferauthority to sell on behalf of Exfinco where the clear terms of the agreementsay that there is no such authority. The concept of giving business efficacy to an agreement between businessmenhas, in my judgment, nothing to do with this case in so far as that concept mayjustify the placing upon a written agreement of any construction different fromthat suggested by the words used in a particular part or clause of it. Thebusinessmen who run Exfinco expressed their intentions in this master agreementclearly, in my view, by the words which they used. That intention, if I haveunderstood it correctly, was to conduct the commercial dealings between Exfincoand Parrot on the basis of agreements for sale of discs to be made by Parrot asagent for Exfinco, with those goods being immediately thereafter agreed to besold by Parrot to Exfinco, so that Exfinco would receive the payments made bybuyers as the sums due under those contracts of sale; but Exfinco were not tobe put in the position of having agreed to sell goods to a buyer, through theagency of Parrot, if there was any avoidable risk of Exfinco being held liableas vendor to that buyer. For that purpose, therefore, the authority of Parrotwas expressly limited, as the Vice-Chancellor held, to exclude the making of anagreement of sale on behalf of Exfinco with reference to any goods which didnot comply with the warranties in cl. 5. Thus, if a buyer to whom Parrot haddelivered defective goods which had caused loss to the buyer, should discoverthat Parrot was selling under the master agreement as agent for Exfinco, thatbuyer, if he tried to claim against Exfinco, would be met by a defence that, ifthe goods were defective, Parrot had no authority on behalf of Exfinco to sellthem. Mr Adkins argued that such a defence could never succeed because, in anycase in which Parrot had dispatched invoices to a buyer directing payment to bemade to the collection account, then Exfinco's standing offer in cl. 2 wasdeemed to have been accepted under *293 the terms of the new cl. 3 in themaster agreement. I do not accept that the new cl. 3 could be held to have hadany such effect. Subclause (a) thereof does nothing to enlarge the nature orterms of the offer contained in cl. 2. Subclause (b) says that: "Receipt by Exfinco of such acceptance ... together with the copies of suchinvoices ... shall constitute an agreement by (Parrot) to sell and by Exfincoto buy the goods therein described on the terms of this agreement ..." I can see nothing in the new clause which could be held to cause receipt byExfinco of an acceptance and schedule to constitute an agreement by Parrot tosell and by Exfinco to buy the goods therein described "on the terms of thisagreement" in any case where under cl. 1 and 2 there was no authority given toParrot to sell those goods on behalf of Exfinco. I can see no obvious scope forthe operation of any estoppel, arising upon the terms of the master agreementand the actions of Parrot and Exfinco thereunder, whether between Parrot andExfinco or between Exfinco and any buyer. As to the Vice-chancellor's ruling that, upon that reading of the masteragreement, there was a flaw in its legal structure, I agree with Dillon LJ thatthere was no such flaw. We are concerned with the principles relevant toformation of contract. In Sudbrook Trading Estate Ltd v Eggleton, to whichDillon LJ has referred. Lord Diplock said at p. 478C: "A contract is complete as a contract as soon as the parties have reachedagreement as to what each of its essential terms is or can with certainty beascertained ..."As between Parrot and Exfinco and any buyer any fact relevant to the questionwhether Parrot did or did not have authority to make the agreement for sale offloppy discs under the terms of the master agreement on behalf of Exfinco was,at the date of making that agreement, capable of being ascertained withcertainty without further agreement between the parties. I have hesitated overthis matter because that principle seems to me to be of uneasy applicationwhere the question of fact determines the issue of title to debts payable underthe agreements for sale not only between the buyer and Exfinco but betweensecured creditors of Parrot and Exfinco. I can, however, see no basis for notapplying it. The validity or invalidity of the contract between Parrot andExfinco for this purpose determines the question as to who is entitled to thesums due from the buyers. No issue has been raised in this case of want ofauthority in Parrot with reference to any particular contract by reference tothe facts relevant to it. On the second main point in the case, whether the master agreement gives riseto valid sales of goods by Parrot on behalf of Exfinco, or to a loan by Exfincoon the security of Parrot's rights to be paid the price of goods sold byParrot, I agree with the conclusion reached by Dillon LJ and with the reasonswhich he has given. I was much troubled by the structure and purpose of themaster agreement according to its literal wording. As explained above, it wasdrawn so as to make Exfinco the buyer from Parrot of discs, and the seller ofthose discs to overseas buyers, but, at the point at which the real world ofcommerce might unpleasantly intrude, namely in the shape of a buyer claimingdamages for defective goods, the limitation upon the authority of Exfinco wouldenable Exfinco to claim that they had not been party to that agreement of sale.Since the agreement prohibits any reference by Parrot to the facts of theagency arrangement there would be no holding out by Exfinco of Parrot as theiragent. A provision which would defeat the buyer's claim is more effective thana collateral guarantee by Parrot to make good any such loss. Nevertheless, Isee no answer to Exfinco's contention that they were under our law entitled toenter into the agreement in the terms therein set out; that no principle of ourlaw is apt to deprive them of the benefit of the rights and obligations therebycreated; and that the fact that the provisions of the master agreement weredesigned to protect Exfinco from any commercial risk on the sale of Parrot'sfloppy discs, and to *294 contain any commercial profit to a sum demonstrablyrelated to the duration of the financial provision made available, does notalter the nature of the rights and obligations created by the master agreement. In particular, I do not think that there is any force in the fact that thetransactions contemplated by the master agreement were, and were intended tobe, "off balance sheet" as the Vice-Chancellor observed. Other long-establishedforms of financing may also be "off balance sheet", namely factoring and blockdiscounting. In this case, Mr Considine, a partner in Cork Gully, one of theadministrative receivers of Parrot and a defendant to counterclaim, was askedquestions about that aspect of the matter. He told the Vice-Chancellor that the"funding" of Exfinco was not separately disclosed in the accounts of Parrot(transcript, 19 January 1990, p. 44), and the reader would not be able to seethat the company was dealing with Exfinco (p. 45D). The Vice-Chancellor thenenquired how the company's accounts could present a fair and true picture ofthe company's business. Mr Considine said that, as an insolvency practitioner,he was not an appropriate person to answer that question but added that onecannot tell just from the accounts all the lines of credit of a company. Heacknowledged, however, that Parrot's auditors, Peat Marwick McLintock, hadprovided to Parrot standard form letters to be sent by Parrot to variousparties including Exfinco. The letter had included the words: "In order to assist our auditors in their examination of our accounts wewould be grateful if you could provide details of the balance on our accountwith yourselves as at the year ending 5 September 1987. The reply should besent direct to our auditors."The response of Exfinco was sent on 17 November 1987, and included thefollowing: "... the information desired seems to us more appropriate to that given bya bank for audit purposes than that which can be given by us. We would like topoint out that we do not lend, or are owed money, by our clients. We arepurchasers, as undisclosed principals, of goods exported by our clients who acton our behalf as collectors of the receivables to bank accounts under ourcontrol. As such we are unable to give you information on moneys which have beenreceived in the past into those same bank accounts. Similarly we do not holdany of our clients' assets as security, nor do we have any arrangements ofset-off guarantee, bonds or indemnities."They then provided a statement of balances which was set out in the letter. MrConsidine accepted that, if the auditors had been unhappy with thatinformation, or had thought that they needed more information to enable them toperform their statutory duty of enabling Parrot to produce a set of accountswhich reflected a true and fair view, they would have been able and entitled togo back to Exfinco and raise further queries. Those answers do not, of course, assist upon the construction of the masteragreement for the purpose of deciding whether it is effective as providing forthe purchase and sale of discs by Exfinco or whether it was in law anarrangement for loans of money on security. The answers do, however, serve inmy view to throw some light upon the concept of "off balance sheet financing"as a relevant consideration. Those who were concerned with the financialstability of Parrot, over the short or longer term, could discover what chargeswere registered and could ask whether there are any off balance sheet lines ofcredit. Auditors could insist upon such reference in the accounts to such linesof credit as would, in their judgment, give a true and fair picture. Those whoprovided credit on security could, if they judged it necessary, insertprovisions which would prohibit the use of the sort of arrangement set out inthe master agreement. If any mischief arising from off balance sheet financingis judged to be serious it could be prohibited by legislation. Under the law asit now stands, I could see no reason for *295 giving, as it were, bad marks tothe master agreement, in that it provides for off balance sheet financing, inthe court's approach to the issue of construction.The counterclaim The Vice-Chancellor stated the issues on the counterclaim (at p. 401 A) as, (1) Can the receivers, being agents of Parrot under the terms of theirappointment, be liable for procuring a breach by Parrot of the master agreementwith Exfinco? (2) Does sec. 234 of the Insolvency Act 1986 ... excuse the receivers fromliability?" On his view of the case, the counterclaim failed because the receivers didnot wrongfully induce any breach of contract but he made findings of fact as tothe state of mind of the receivers in which the letters were sent to overseasbuyers on 8 June. On the construction of the master agreement which Dillon LJhas set out in his judgment, and with which I agree, it is necessary toconsider the issues of law raised by the counterclaim. The pleaded case of Exfinco originally was that the receivers knowinglyprocured a breach by Parrot of the master agreement and/or knowingly interferedwith the contractual relations between Parrot and Exfinco set out in the masteragreement; but, by amendment, there was added the allegation that the receiversknowingly procured a breach of or knowingly interfered with the contractualrelations between Exfinco and the overseas buyers. Before the Vice-Chancellor it was common ground that, if Exfinco would, apartfrom intervention by the receivers, have been entitled after 16 May to receivepayments into the collection accounts from the overseas buyers, the receiverswould have been liable for procuring a breach of contract between the overseasbuyers and Exfinco but for their position as receivers. As I understood theargument, that was the position also in this court. Proof of liability for the tort of procuring a breach of contract does notdepend upon proof that the tortfeasor knew and intended his actions to be ofthat nature in their legal consequences. It is sufficient that he knew of theexistence of the contract and intentionally did the acts which in law amountedto the procuring of a breach of contract. In short, on the facts of this case,it is not in issue that the fact that the receivers thought that, on the trueconstruction of the master agreement, Exfinco had, or probably had, no validcontractual claim to receive the payments from overseas buyers, would by itselfbe no defence. As to the defence based upon sec. 234 of the 1986 Act, I agree that for thereasons given by Dillon LJ that section upon its true construction provides nodefence to the receivers against Exfinco's counterclaim. As to the defence at common law, based upon the principle or rule stated inSaid v Butt, I agree that, for the reasons given by Dillon LJ, this courtshould accept that rule as part of the law. The remaining questions are,therefore, whether that rule affords any defence to the receivers on the factsof this case and, if it does not, whether the rule should properly be extendedso as to protect the receivers from liability. So far as concerns the procuring by the receivers of breaches by Parrot ofthe master agreement between Parrot and Exfinco it is, I think, clear that therule applies. I see no reason to distinguish between the receivers as agentsfor Parrot and any servant of Parrot such as a director who could be regardedas the alter ego of Parrot: thus, the rule as approved by Evershed MR in CThomson & Co Ltd v Deakin at p. 681 may be read as follows: if a servant oragent, acting bona fide within the scope of his authority, procures or causesthe employer, or principal, to break a contract which the employer or principalhas made with a third party, the third party cannot sue the servant or agentfor interference with the contract; for he is the alter ego of the employer,and the employer *296 cannot be sued for inducing himself to break a contract.The requirement of "acting bona fide within the scope of his authority" was notrelied upon by Exfinco in this case as depriving the receivers of theprotection of the rule if it is otherwise available to them. By their alternative case, however, Exfinco assert that the receivers, bysending the letters to the overseas buyers, procured breaches by those buyersof the contracts between the buyers and Exfinco. Since, in each case, theagreement for sale made by Parrot as agent for Exfinco with the outside buyerwas not, for the purposes of the rule in Said v Butt, a contract to whichParrot was a party, and Parrot was not, therefore, by its alter ego thereceivers inducing itself to break a contract but was, by its alter ego,inducing the overseas buyer to break its contract with Exfinco, it wassubmitted that the rule as stated does not apply. That submission is correct iffor this purpose it is right to regard each contract made by Parrot with anoverseas buyer, in Parrot's own name and without mention of Exfinco, but underwhich Exfinco would have the right to intervene if it chose to do so, as acontract to which Parrot was not a party. It is obvious that the questionwhether Parrot is to be regarded as a party to each contract made by Parrotunder the master agreement is likely to receive a different answer according tothe purpose for which or the context in which the question is asked. If thesubmission is right, the further question remains whether the rule in Said vButt can and should be extended so as to afford protection to the receivers. Dillon LJ would apply the rule on the grounds that the position of anundisclosed principal is recognised as anomalous, and that it should not havethe effect of creating a contractual relationship between the undisclosedprincipal and the overseas buyer which is, for the purposes of the rule in Saidv Butt, separate from the subsisting contractual relationship between Parrot,as agent of the undisclosed principal, and the overseas buyers. Dillon LJ addsthat, since each buyer, at the requirement of Exfinco, knew only Parrot as theseller, if a buyer had complied with the instructions of the receivers given onbehalf of Parrot there would have been no breach of contract on the part of thebuyer. I have found this point to be one of great difficulty. The reasoning of McCardie J in Said v Butt, which was approved by Evershed Mrin Thomson v Deakin was, as Dillon LJ has explained, based (1) upon the absenceof any case where a servant has been held liable for procuring a breach of hismaster's contract; (2) upon the undesirable consequences of a servant beingheld so liable; and (3) upon the concept that the acts of the servant are inlaw the acts of his employer; but, in formulating the rule, McCardie Jexpressed the belief that it was not inconsistent with the rule that a directoror servant who actually takes part in or actually authorises such torts asassault, trespass to property, nuisance or the like, may be liable in damagesas a joint participant in one of such recognised heads of tortious wrong. Thus,if a director of a company gives instructions for the commission of a tort bythe company the director may be personally liable to the injured party for thetort although the tort was the act of the company: see per Lord Buckmaster inRainham Chemical Works Ltd v Belvedere Fish Guano Co Ltd [1921] 2 AC 465 at p.476; Atkin LJ in Performing Right Society Ltd v Ciryl Theatrical Syndicate Ltd[1924] 1 KB 1 at pp. 14-15; cited by Dillon LJ in Mancetter Developments Ltd vGarmanson Ltd [1986] 1 QB 1212; (1986) 2 BCC 98,924 at p. 1217;98,926. Thatprinciple of liability exists notwithstanding the governing principle ofSalomon's case [1897] AC 22 to which Younger LJ referred in his dissentingjudgment in the Court of Appeal in the Rainham Chemical Works case [1920] 2 KB487 at p. 522. McCardie J, in explaining at pp. 505-506 why, in his judgment, the directorof a company should not be liable if, acting bona fide, he procures the companyto break its contract with a third party, referred to the cases where liabilityhad been imposed for procuring a breach of contract and said: *297 "The explanation of the breadth of the language used in the decisionsprobably lies in the fact that in every one of the sets of circumstances beforethe Court the person who procured the breach of contract was in fact astranger, that is a third person, who stood wholly outside the area of thebargain made between the two contracting parties. If he is in the position of astranger, he will be prima facie liable, even though he may act honestly, orwithout malice, or in the best interests of himself; or even if he acts as analtruist, seeking only the good of another: see the decisions cited in Pratt'sCase [1919] 1 KB 265, 266 and the Glamorgan Coal Case [1905] AC 239. But the servant who causes a breach of his master's contract with a thirdperson seems to stand in a wholly different position. He is not a stranger. Heis the alter ego of his master. His acts are in law the acts of his employer.In such a case it is the master himself, by his agent, breaking the contract hehas made, and in my view an action against the agent under the Lumley v. Gye 2E & B 216 principle must therefore fail, just as it would fail if broughtagainst the master himself for wrongful procuring a breach of his owncontract." This question may be tested by reference to other hypothetical acts on thepart of a director of Parrot. I say that because, on the assumption that underthe master agreement the sales to overseas buyers were real contracts of saleof goods, the position of the receivers in causing breaches of those contractscannot be any better than that of directors of Parrot. The director mightdecide that the master agreement between Parrot and Exfinco should, in the bestinterests of Parrot, be terminated at once in breach of its terms. When themaster agreement was made, Exfinco knew that the performance or breach of theterms must depend upon the decisions of Parrot to be made by its agents.Exfinco, I think, can fairly be regarded as looking for performance of thecontract, or for damages for breach of it, only to Parrot when a bona fidedecision is made for termination of the agreement. The rule in Said v Butttherefore provides that the director who made that decision is not personallyliable. Next, if the director should make a similar decision in good faith withreference to not performing contracts made in the past by Parrot with Exfincopursuant to the master agreement, if such there should be, the same principlewould apply. If, however, Parrot had on separate instructions and as professed agent forExfinco independently of any master agreement, made a contract on behalf ofExfinco with a foreign buyer, and the director then, having decided that itwould be to the commercial advantage of Parrot to cause the foreign buyer notto perform that contract, procured the foreign buyer to break it, there is noreason apparent from the grounds of decision in Said v Butt why the principlestated in the Rainham Chemical Works case and applied in Mancetter Ltd by thiscourt, should not be applicable to make that director liable. That director,and Parrot, would, I think, be outside the area of the bargain made betweenExfinco and the buyer, and the fact that Parrot was the agent by whichExfinco's contract was made could, I think, make no difference. The directorwould not be deciding that Parrot should not perform its own contract but thatParrot should cause the buyer to break its contract. Although Exfinco lookedonly to Parrot for performance of Parrot's contractual promises, or for damagesfor Parrot's failure to perform them, I do not see why Exfinco should betreated as looking only to Parrot for damages for the breach of its contractwith the buyer if that breach was brought about by the instructions of thedirectors of Parrot. The receivers, in my judgment, would be in no betterposition. The contracts of the buyers with which the counterclaim is concerned were,however, not made by Parrot professedly as agent for Exfinco. Parrot made thecontracts apparently as principal but in fact, as Parrot knew and intended, asagent for Exfinco as undisclosed principal. I agree that the contractual rightsof the undisclosed principal which our law *298 recognises as brought intoexistence by such a contract are, in a sense, anomalous, and are clearly notseparate in their origin from the contract made between Parrot and Exfincounder which Parrot acted as Exfinco's agent. Is that close relationship incontractual origin, however, sufficient, for the purposes for which thereceivers seek to rely upon it? If the directors, having taken advice, were ofthe opinion that Parrot was not in law obliged to comply with the masteragreement, and that it was in the best interests of Parrot not to comply withit, and that, therefore, buyers should be told to pay sums due for the price ofgoods to Parrot direct and not into the collection accounts, the sending ofinstructions to buyers to that effect should, in my judgment, for the purposesof the rule in Said v Butt, be classified as the bringing about of breaches ofcontract by Parrot with Exfinco, as it undoubtedly would under the masteragreement, and not as the procuring of breaches of contract by the buyers asagainst Exfinco. Part of the purpose of the rule in Said v Butt was, as Iunderstand it, to avoid what was seen as the undesirable consequence of makingthe servant of a company, acting in good faith in the course of his employment,personally liable in tort in respect of what could be seen in commercialreality as no more than a breach of contract on the part of the employer. Thedecision to send instructions to the buyers that payment should be made toParrot and not into the collection accounts should in my judgment be held tohave been no more than the bringing about of a breach of contract on the partof Parrot under the terms of the master agreement. The fact that the decisionto send the instructions was made by the receivers, in my judgment, makes nodifference. I would, therefore, dismiss Exfinco's appeal with reference to thecounterclaim.Staughton LJ:(1) The validity of the master agreement It is argued on behalf of the Welsh Agency that the provisions of the masteragreement relating to agency and a sale by Parrot to Exfinco are ineffective byreason of uncertainty. It would follow that there was no sale of goods byParrot to Exfinco, and no resale by Parrot as agent for Exfinco to overseasbuyers; all that happened was that Parrot sold its own goods on its own behalfto those buyers, and Exfinco lent Parrot money. Presumably Exfinco would stillhave a claim against Parrot for return of that money, with interest at suchrate as the law might allow. But Exfinco would rank as an unsecured creditor. There are two essential steps to that argument. First it is said thatParrot's authority to contract on behalf of Exfinco for the sale of goods to anoverseas buyer was limited, by the wording of cl. 1 and 2(d), to goods whichwere not defective. Secondly, since it would not or might not in practice beknown at the time of the contract to sell whether the goods were defective ornot, the master agreement is in part ineffective in law. The first step depends upon the correct interpretation of the masteragreement. It provides in cl. 1: "Exfinco hereby authorises the exporter to agree on behalf of Exfinco tosell to any buyer goods immediately thereafter agreed to be sold by theexporter to Exfinco pursuant to this agreement ..."By cl. 2 Exfinco makes a standing offer to buy goods from Parrot. But it issubject to this proviso: "(d) this offer extends only to goods which comply with each of thewarranties contained in Clause 5 hereof."One of those warranties is as follows:"5 (d) that the goods shall comply in all respects with the informationcontained in the acceptance, with all relevant provisions of English andforeign law relating to such goods and with the terms and conditions of theagreements for the sale thereof by the exporter to Exfinco and by the exporteron behalf of Exfinco to the buyer, and that the goods shall be of merchantablequality and fit for the purpose for which they are intended for use by thebuyer." *299 The authority conferred by cl. 1 is to make a contract, an agreement tosell, on behalf of Exfinco. As appears from sec. 2 of the Sale of Goods Act1979, this is to be distinguished from a sale, when the property passes. It wasaccepted in argument that the contract with the overseas buyer was mostunlikely to have been for the sale of specific goods; it would have been anagreement to sell by description goods not yet identified to the buyer. Theymay even have been, so far as the agreement to sell was concerned, goods whichParrot had not yet bought or manufactured. In those circumstances, what meaning is to be given to the words "goodsimmediately thereafter agreed to be sold by the exporter to Exfinco"? If thoseare words of description, limiting the class of goods which Parrot areauthorised to agree to sell, how can they include a limit which is onlyapplicable to specific goods? If the description of the goods in the agreementto sell was of goods that it was illegal by English law to export, or by thelaw of the relevant foreign country to import, it might be said that thecombined effect of cl. 2(d) and 5(d) was to exclude authority of Parrot toagree to sell goods of that description on behalf of Exfinco. But it is muchmore difficult to read cl. 1 as providing that there shall be no authority toagree to sell goods by description if the goods subsequently appropriated tothe contract are defective, even though the description is of goods which arenot otherwise excluded from cl. 2. However it is plain, as Mr Moss points out for the Welsh Agency, that someappropriation of goods is envisaged at an early stage. Thus cl. 5(a) requiresthat "forthwith upon entering into an agreement to sell any goods on Exfinco'sbehalf", Parrot shall accept Exfinco's offer to buy those goods. And by cl.5(f) Parrot are not to accept the offer before goods have been unconditionallyappropriated by Parrot to the contract of sale to an overseas buyer. By thoseterms, although the contract of sale to the buyer will probably be forunascertained goods, Parrot are obliged to have goods of the contractdescription ready to hand so that they can "forthwith" be appropriated. It isnot then wholly implausible that the authority of Parrot to agree to sell themon behalf of Exfinco should depend, among other things, on whether those goodsare sound or defective. But this also means that it should be possible toascertain whether the condition is fulfilled. Another view is that the words "immediately thereafter agreed to be sold" arenot words of description. Can they be read as "which are immediately thereafteragreed to be sold", as narrative rather than a defining participle? Thedifficulty with that approach is then to find some meaning for cl. 2(d). Parrotwould have authority to agree to sell goods on behalf of Exfinco subject to theother limitations in cl. 1; but Exfinco would not be offering to buy fromParrot any goods which in fact did not comply with the warranties in cl. 5.That too seems to me somewhat implausible. Faced with this choice of evils, I conclude in the end and in agreement withthe Vice-Chancellor that the authority of Parrot is indeed limited. They arenot authorised to agree to sell on behalf of Exfinco, if the goods which theyintend to appropriate "forthwith" are defective or otherwise fail to complywith the warranties in cl. 5. The Vice-Chancellor in his judgment said that Mr Crystal, for Exfinco, didnot dispute the consequences which would flow from that conclusion. This mayhave been a misunderstanding. But even if it is right, I would certainly allowany such concession to be withdrawn. So it is next necessary to considerwhether the master agreement, or whatever was done under it, was vitiated byuncertainty. All the terms needed to form a complete contract must either beagreed, or ascertainable by some means which does not involve further agreementbetween the parties; otherwise there is no contract: May and Butcher Ltd v TheKing [1934] 2 KB 17n by Lord Dunedin at p. 21, Sudbrook Trading Estate Ltd vEggleton [1983] 1 AC 444 by Lord Diplock at p. 478G, G Scammell and Nephew Ltdv Ouston [1941] AC 251 by Lord Wright at p. 268. *300 I can see no uncertainty in the master agreement itself. There is indeedobscurity as to its meaning, but no uncertainty as to what its terms are suchas was envisaged by Lord Dunedin, Lord Diplock and Lord Wright. The uncertaintyis, I think, said to arise when Parrot make a contract with an overseas buyer.It may well not be known in practice, even to Parrot, whether the goods whichthey intend to appropriate forthwith to the contract are or are not defective;and it certainly will not be known to the overseas buyer - or to Exfinco, forthat matter. So it may not be known even to Parrot or Exfinco whether Parrotcontracts as the sole principal, or as agent for an undisclosed principal. (Two parentheses at this point. First, I do not propose to enter upon thecontroversy, which is discussed in Bowstead on Agency (15th ed.) pp. 312-313,as to whether an undisclosed principal is a party to the contract, or insteadhas a right to intervene. As will appear later, I do not for my part find itnecessary to do so, in order to decide any question in this appeal. Secondly,although attention was drawn to the point, neither party has argued that Parrotcontracted in such terms as to exclude any undisclosed principal, by reason ofthe fact that they were defined as "seller" in their conditions of sale. Casessuch as Humble v Hunter (1848) 12 QB 310 were not relied upon.) In my judgment this issue is decided by the rule that something is certain inlaw if it can be rendered certain without future agreement of the parties.There has been no evidence to suggest that the quality of the goods whichParrot intended to appropriate could not be ascertained with certainty, at thetime when they made contracts to sell to overseas buyers. I see no reason todoubt that this could have been done. As I have said, Mr Moss was at pains toemphasise that goods were to be appropriated forthwith at that time. So thequestion whether Parrot were contracting as the only principals, or as agentsfor undisclosed principals, could then and there have been resolved. It was nota question that depended on an existing fact which could not be ascertained bypresently available means, such as the chemical composition of some distantplanet. Mr Moss submits that, in derogation from the general rule, at least theparties to a contract must be known when it is made, rather than merelyascertainable. Like the Vice-Chancellor, I know of no authority on the point.But for my part I consider that the general rule should apply. Anyonecontracting with an agent on behalf of a syndicate at Lloyds might have to goto a little trouble, if he thought it necessary, to know who the members of thesyndicate were. But the fact would exist, and be capable of ascertainment withcertainty. I reject the argument that the master agreement, or the agencyaspect of the contracts made under it, is invalid for uncertainty.(2) Sale or charge?(a) The test We were referred to a bewildering array of authority on this to plc, some ofit by no means easy to reconcile. The problem is not made any easier by thevariety of language that has been used: substance, truth, reality, genuine aregood words; disguise, cloak, mask, colourable device, label, form, artificial,sham, stratagem and pretence are "bad names", to adopt the phrase quoted byDixon J in Palette Shoes Proprietary Ltd v Krohn (1937) 58 CLR 1 at p. 28. Itis necessary to discover, if one can, the ideas which these words are intendedto convey. One can start from the position that statute law in this country, when itenacts rules to be applied to particular transactions, is in general referringto the legal nature of a transaction and not to its economic effect. Theleading authority on this point, albeit in a case from Malaya, is the advice ofLord Devlin in Chow Yoong Hong v Choong Fah Rubber Manufactory [1962] AC 209 atp. 216: "There are many ways of raising cash besides borrowing ... If in form it isnot a loan, it is not to the point to say that its object was to raise moneyfor one of them *301 or that the parties could have produced the same resultmore conveniently by borrowing and lending money."See too the Crowther Report on Consumer Credit (Cmnd 4596, 1971) para. 1.3.6,where it was said that the existing law was deficient because: "It lacks any functional basis: distinctions between one type oftransaction and another are drawn on the basis of legal abstractions ratherthan on the basis of commercial reality." There are in my opinion two routes by which this principle can be overcome.The first, which I will call the external route, is to show that the writtendocument does not represent the agreement of the parties. It may, if onewishes, then be called a sham, a cloak or a device. The second is the internalroute, when one looks only at the written agreement, in order to ascertain fromits terms whether it amounts to a transaction of the legal nature which theparties ascribe to it. These two routes are described, for example, by LordHanworth MR in Re George Inglefield Ltd [1933] 1 Ch 1 at pp. 19,23, by MaughamLJ in Re Lovegrove [1935] Ch 464 at p. 496, and by Knox J in Curtain Dream plcv Churchill Merchanting Ltd [1990] BCC 341 at p. 349. (I express no view on theway that Knox J described the second route or the result which he reached; anappeal is pending.) The Welsh Agency do not rely on the external route in this case. Theydisclaim any argument that the master agreement was a sham. It is not thereforenecessary for me to consider the external route in any detail, except for thepurpo se of showing what this appeal is not about. One can show that thewritten document does not reflect the agreement of the parties by proving acollateral agreement, or at least a common intention, to that effect. Or theremay be proof of a subsequent variation, as was argued in Lloyds & ScottishFinance Ltd v Cyril Lord Carpets Sales Ltd (above). In Snook v London and West Riding Investments Ltd [1967] 2 QB 786 at p. 802,Diplock LJ said: "... for acts or documents to be a 'sham', with whatever legal consequencesfollow from this, all the parties thereto must have a common intention that theacts or documents are not to create the legal rights and obligations which theygive the appearance of creating. No unexpressed intentions of a ' shammer'affect the rights of a party whom he deceived." In Garnac Grain Co Inc v HMF Faure & Fairclough Ltd [1966] 1 QB 650 at p.683, Diplock LJ said: "... the contemplation or expectation or intention (unless incorporated inthe contract) of the parties or either of them as to the way in which it willbe performed or left unperformed does not affect their legal rights orobligations under it. To affect these it is necessary to go further and to showthat the parties really made some other and different contract between them andagreed that the ostensible contract should not give rise to legally enforceablerights or liabilities."That was, I think, approved in the Lloyds & Scottish Finance case. I do not consider that there is any significant difference between the twopassages from Diplock LJ just cited. But it is arguable that a common intentionwould amount to something less than a collateral agreement. That view accordswith sec. 62(4) of the Sale of Goods Act 1979: "The provisions of this Act about contracts of sale do not apply to atransaction in the form of a contract of sale which is intended to operate byway of mortgage, pledge, charge or other security."That is a re-enactment of sec. 61(4) in the 1893 Act, which was perhaps aninteresting and early statutory recognition of the doctrine that I amconsidering. *302 There was here no sham, no collateral agreement or common intention tobe bound by different terms, and no subsequent variation to that effect. So Ican leave the external route, and turn to an internal consideration of themaster agreement itself. This must be carried out on the basis that the partiesintended to be bound by its terms, and by nothing else. If one part of the agreement purports to create a particular legaltransaction, it may happen that other provisions are inconsistent with such atransaction. The task of the court is then to ascertain which is the substance,the truth, the reality. That was plainly the approach of Lord Herschell LC inMcEntire v Crossley Brothers Ltd [1895] AC 457 at pp. 463-466, where there arerepeated references to inconsistency. See also the speech of Lord Watson at p.467: "The duty of a court is to examine every part of the agreement, everystipulation which it contains, and to consider their mutual bearing upon eachother; but it is entirely beyond the function of a court to discard the plainmeaning of any term in the agreement unless there can be found within its fourcorners other language and other stipulations which necessarily deprive suchterm of its primary significance." Mr Moss argued that the court is free to disregard the label which theparties have attached to a transaction. If by label one means the descriptionwhich is found on the backsheet, or even in a preamble or a recital, I can seethat it should be given little if any weight. A label can also be foundelsewhere. Thus in Street v Mountford [1985] AC 809, Mrs Mountford agreed to"take" a furnished room; the references to "licence" in the agreement were intruth labels and nothing more. "Licence" was the name by which the agreementdescribed itself. And in A G Securities v Vaughan [1990] AC 417 in the Court ofAppeal at p. 444, Bingham LJ said that: "... the true legal nature of a transaction is not to be altered by thedescription the parties choose to give it." In my judgment the correct process, when one is following the internal route,is to look at the operative parts of the document, in order to discover whatlegal transaction they provide for. If some parts appear to be inconsistentwith others in this respect, a decision must be made between the two. This iswhat I understand by ascertaining the substance of the transaction. The caseson whether an agreement provides for a licence or tenancy-Street v Mountford, AG Securities v Vaughan and Aslan v Murphy [1990] 1 WLR 766 - do not in myopinion overturn this well-established doctrine. Nor does the decision of themajority of this court in Gisborne v Burton [1989] QB 390. There it was held,with reference to the Agricultural Holdings Act 1948, that one must look at thescheme of a preordained series of transactions as a whole, instead ofconcentrating on each pre-ordained step individually. The doctrine of revenuelaw, derived from W T Ramsay Ltd v I R Commrs [1982] AC 300 and other cases,was thus extended to private transactions. I do not need to consider whether itshould also be extended to this case; there is no series of transactions here,but only the one master agreement. It can be said that Exfinco have adopted their method of business becausetheir customers wished to avoid the registration provisions of the CompaniesAct, and the appearance of loans in their balance sheets. But one should not,from sympathy for creditors or rather for a debenture holder, overthrow bothestablished law and recognised methods of providing finance for trade andindustry.(b) Application of the test The master agreement provides in plain terms that Parrot shall sell goods toExfinco, and shall sell the same goods to overseas buyers as agent for Exfinco.But it is argued *303 that there are four aspects of the master agreement whichshow that, in reality, there was only a loan of money secured by a charge onthe goods and on the debts owed by the overseas buyers to Parrot. TheVice-Chancellor accepted that three of the points raised led to thisconclusion. The fourth is relied on in the respondent's notice of the WelshAgency. The four points are: (i) price, (ii) discount, (iii) right ofredemption, and (iv) right of retention. They are described as badges, orindicia, of a loan transaction. As to the price, the argument appears to be based on the way that it wasfixed. The sum payable by Exfinco to Parrot was to be 90 per cent of the pricepayable by the overseas buyer, less a discount fixed at the time of thetransaction, which was to be adjusted later by reference to the time which ittook all overseas buyers (not merely the purchaser of the goods in question) topay what they owed. The Vice-Chancellor said of that (at p. 407E): "Whilst these arrangements are not wholly inconsistent with the sale ofgoods (parties can fix the price in any way they think fit), they make muchmore sense if the substance of the transaction is not a sale of goods but anassignment of book debts."I agree with the sentiment there expressed, although it could perhaps be lessstrongly emphasised. Of the discount it is said that this is a misnomer, because it is not fixedin advance but calculated much later; it is therefore not a discount butinterest. Again it is a provision which one might expect to find in a contractof loan. But it is not inconsistent with a contract of sale; the parties can,if they wish, agree that the buyer may deduct from the price a sum equal tointerest on a debt which is paid late by some other person. Thirdly, there is the right of redemption. The master agreement and theoperating procedures provided that, on giving three months' notice, Parrotwould be liable to pay to Exfinco a sum equal to all amounts owed by overseasbuyers; and thereupon all interests and benefits of Exfinco in the goods andthe debts of overseas buyers were relinquished in favour of Parrot. The Vice-Chancellor held (at p. 409F) that this right of redemption was"wholly inconsistent with the master agreement being in substance a sale". I amafraid that I cannot agree. A contract of sale can lawfully provide that incertain circumstances, and for a sum which is ascertained or ascertainable, theseller may repurchase the property sold from the buyer. Fourthly, the right of retention. The master agreement and the operatingprocedures provide that Exfinco may deduct various amounts from sums whichwould otherwise be due to Parrot. More importantly, Exfinco are entitled toretain a sum out of the balance, described as their retention, apparently as asafeguard against the possibility that there will be other sums to be deductedin the future. We heard long and elaborate arguments as to whether this right of retentionwas a registrable charge. When A owes money to B, and it is agreed between themthat A need not pay for the time being until it is determined whether B willowe money to A in the future, has B charged A's debt in favour of A? Thedecision of Millett J in Re Charge Card Services Ltd (No. 2) (1986) 2 BCC99,373; [1987] Ch 150 was that there was no charge in those circumstances. Itis said that his decision was wrong. I do not find it necessary to decide this issue. The elaborate regime ofdeductions and retention is already an indication that the master agreementprovides for a loan rather than a sale; such terms are unusual in contracts ofsale, and more common in agreements to lend money. I do not see that theindication would be any stronger if the right of retention were held to be aregistrable charge. It is not that right which Exfinco seek to enforce in thisaction; nor are they reproached for having enforced it in the past. The *304rights which they assert are to have the moneys which the receivers havecollected from overseas buyers, to collect (if they can) what remains due fromthat source, and to retain what they have collected since the receivership.They do not claim to keep this last amount by virtue of their right ofretention under the operating procedures, but because it was due to them. Those are the four features which the Welsh Agency rely on as showing thatthe master agreement provided for a charge, not a sale. They are terms morecommonly found in contracts to lend money. But none is in my opinioninconsistent with a contract of sale. There remains the fact that the masteragreement did in terms provide for a sale by Parrot to Exfinco, and by Parrotas agent for Exfinco to overseas buyers. It was plainly the intention thatExfinco should become entitled, as against the overseas buyers, to the rightsand remedies of a seller of goods, if Exfinco found it necessary to exercisethem. I feel unable to conclude that, in substance or in reality or in truth,the intention of the parties as derived from the terms of the written agreementwas that Exfinco should not acquire those rights and remedies. It follows thatthe agreement must also have provided for Exfinco to buy the goods from Parrot,as it said. In my judgment the agreement was effective in accordance with itsterms, and did not create a charge on goods or on book debts.(3) Other issues on the claim Since there was no charge, it is unnecessary to decide whether it would havebeen registrable under sec. 395 of the Companies Act 1985. It is alsounnecessary to decide whether the Welsh Agency's debenture should be construedso as not to apply to any property charge to Exfinco by the master agreement,because one of the Agency's directors knew of the master agreement but not itsterms. I would merely say that the argument seems to take what Lord Wilberforcesaid in Reardon Smith Line Ltd v Yngvar Hanson-Tangen [1976] 1 WLR 989 at pp.996-997 far beyond what it was intended to mean. Thirdly, it is unnecessary to decide whether Exfinco are entitled in any caseto retain moneys which they collected from overseas buyers between theappointment of receivers and the date when notice was give by the receivers tooverseas buyers claiming payment, or until some later date. (This was describedas the intervention point.)(4) The counterclaim In para. 61 of the counterclaim as originally pleaded, it was said that thereceivers, by instructing the overseas buyers to pay them rather than to theaccount established by Parrot but controlled by Exfinco, procured Parrot tobreak their contract with Exfinco. By amendment it was pleaded in thealternative that the receivers thereby procured breaches by the overseas buyersof their contracts with Exfinco. In this court the live point, as it seemed to me, was whether the receiverswere liable for procuring the breaches referred to in the amendment. Mr Crystaltold us that this was how it was put before the Vice-Chancellor; it was alsothe case considered in his outline argument before this court; and para. 35 ofthe notice of appeal by Exfinco appears to take the same line. Whichever waythe case is put, it would have to be decided one day whether the receivers'action has caused any loss to Exfinco and if so how much. That may turn out tobe a difficult problem. For the present it is said on behalf of the receiversthat they have a defence to the counterclaim, both by statute and at commonlaw. The statute relied on is the Insolvency Act 1986, which provides in sec. 234that where an administrative receiver "seizes or disposes of any property whichis not property of *305 the company" and believes, and has reasonable groundsfor believing, that he is entitled to seize or dispose of that property, he isnot liable "in respect of any loss or damage resulting from the seizure ordisposal", unless caused by his negligence. This section was first enacted in1985; but it bears a marked resemblance to sec. 61 of the Bankruptcy Act 1914,which dealt with seizure or disposal of "any goods, chattels, property or othereffects in the possession or on the premises of a debtor." The Insolvency Act has, in sec. 436, a wide definition of "property" whichexpressly includes things in action. Nevertheless it seems to me that sec. 234must be dealing with tangible property only. I do not see how one can seize anintangible; nor do I see how one can dispose of an intangible in such a manneras to cause loss or damage to the owner. If that is wrong, I still do not consider that the section provides a defencein this case, for the receivers did not size and did not dispose of the debtsdue to Exfinco from overseas buyers. At most they attempted to do so, and thesection provides no defence to that. The anomaly, that a receiver might beliable for an attempt but not for a completed seizure or disposal, confirms myview that the section is not dealing with intangible property. It is concernedwith choses in possession, not choses in action. In the light of those conclusions, I do not need to decide whether there wasevidence to justify a conclusion that the receivers both believed and hadreasonable grounds for believing that they were entitled to demand payment ofthe debts. The defence at common law is said to be that the receivers were agents ofParrot, and that an agent has no tortious liability if he procures a breach ofcontract by his principal. We were referred to authorities which support such arule, and these have since been supplemented by the research of Dillon LJ forwhich I am grateful. The rule, if such it be, seems anomalous to me and must bejustified on policy grounds. Even then, there is a question whether it can beextended to an administrative receiver (as was held by Sir NeilLawson in Lathiav Dronsfield Bros Ltd [1987] BCLC 321), who is an agent of an unusual kind,being appointed by and owing a duty to a stranger. In the event I express no concluded view as to the immunity of an agent whoprocures a breach of contract by his principal. Mr Crystal now puts his case,as I have said, on the basis that the receivers procured breaches of contractby the overseas buyers. No authority was cited to show that an agent hasimmunity when he procures someone other than his principal to break hiscontract; and I can think of no reason why an agent should enjoy such immunity. The case for Exfinco, as I understand it, is not that the receivers'instructions to overseas buyers caused them to pay what they owed to adifferent account, in the name of Parrot. If that had been the complaint therewould have been no damage, on our view of the main issues in this appeal, forExfinco would be entitled now to those moneys. The complaint is that thereceivers' instructions caused some of the overseas buyers not to pay at all.That, as I have said, may give rise to a difficult problem of causation; but itdoes not fall to be decided today. No doubt Parrot, as Dillon LJ points out, were parties to the contracts whichthe receivers are said to have procured to be broken, since Parrot were agentswho contracted personally. But it is not Parrot that the receivers are said tohave procured to break those contracts; it is the overseas buyers. Exfinco areentitled to claim damages, whether they too were parties to those contracts ormerely entitled to intervene as undisclosed principals (a point upon which Ionce again refrain from expressing any view). The status of the receivers asagents affords them no defence. I would allow this appeal, including the appeal on the counterclaim.(Appeal allowed in part. Leave to appeal to the House of Lords refused) (c) Sweet & Maxwell LimitedEND OF DOCUMENT © 2007 Thomson/West. No Claim to Orig. US Gov. Works.