FRONTIERS OF LAW IN CHINA ARTICLE. WU Zhicheng

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1 FRONTIERS OF LAW IN CHINA VOL. 13 JUNE 2018 NO. 2 DOI /s ARTICLE A COMPARATIVE STUDY OF THE CHINESE LAW OF CONSTRUCTIVE DELIVERY FROM AN ENGLISH COMMON LAW PERSPECTIVE WU Zhicheng Abstract All three forms of constructive delivery, namely, traditio brevi manu, traditio longa manu, and constitutum possessorium exist in both Chinese law and English law with notable differences in each form. As regards traditio brevi manu, the current unique requirement of the transferee s prior possession being legal under Chinese law cannot be found in or deduced from its English counterpart. As regards traditio longa manu, the major difference between the two jurisdictions is that the third-party possessor s attornment is necessary condition for a valid traditio longa manu in English law whereas it is not in Chinese law. As regards constitutum possessorium, while English law accepts a wider scope of scenarios than Chinese law, passing of property in English law by way of constitutum possessorium is only effective between the parties themselves but not viz a viz third parties whereas it is effective in both respects in Chinese law. Compared to a mess in English law regarding the issue of symbolic delivery, the simple, clear and negative attitude towards symbolic delivery in Chinese law is to be applauded, and is to be regarded as a Chinese voice that should be insisted on and be brought into the upcoming Book of Property of the Chinese Civil Code. Keywords constructive delivery, traditio brevi manu, traditio longa manu, constitutum possessorium, symbolic delivery INTRODUCTION I. TRADITIO BREVI MANU II. TRADITIO LONGA MANU III. CONSTITUTUM POSSESSORIUM IV. TRADITIO SYMBOLICA CONCLUSION INTRODUCTION The new General Provisions of Civil Law 2017 was enacted in March 15, 2017, and has been effective since October 1, 2017 to replace the old General Provisions of Civil * ( 吴至诚 ) D.Phil. Candidate in Law, Faculty of Law, University of Oxford, Brasenose College, Oxford OX1 4AJ, UK; Assistant Professor, School of Law, Renmin University of China, Beijing , China. Contact: zhicheng.wu@law.ox.ac.uk

2 292 FRONTIERS OF LAW IN CHINA [Vol. 13: 291 Law This was a landmark legislative starting point after protracted drafting efforts made by generations of academics for the first Civil Code of the People s Republic of China. Current drafting work then moved on to separate Books including the Book of Property, the promulgation of which is therefore no longer a bridge too far. Similar to main topics in Chinese property law, English property law also mainly deals with the types, the creation, the transfer, and the extinction of property rights. So far as transfer of ownership (or, title in the English context) to movables (or, chattels in the English context) is concerned, while delivery is the sole method of conveyance in Chinese law, 1 delivery is not the only method of conveyance in English law. 2 Apart from delivery there are other two methods, one being deed, 3 the other being intent (limited to sale of goods cases). 4 However, the role of delivery is not unimportant in the English law of conveyance because even in cases of sale of goods, parties can still contract out the default rule of transfer by intent, and stipulate that property passes by delivery. Delivery can be divided into two categories, namely, (i) actual delivery ( 现实交付 ), referring to handing over of physical, direct possession, and (ii) constructive delivery ( 观念交付 ), referring to handing over of fictional, indirect possession, or possession that has already been passed. Constructive delivery can be further divided into three sub-categories in both Chinese law and English law, namely, traditio brevi manu ( 简易交付 ), traditio longa manu ( 指示交付 ) and constitutum possessorium ( 占有改定 ). These sub-categories were not explicitly recognized in Chinese law until Property Law 2007, but as pointed out by scholars, ideas of traditio brevi manu and traditio longa manu have already been implicitly recognized in provisions of Contract Law As for common law jurisdictions, since this topic belongs to a rather traditional area of law, English law could be regarded not only as the homeland from a historical perspective, but also as the most representative one among various common law jurisdictions for comparative research. Despite a rich academic literature involving comparison between Chinese law and major civil law jurisdictions in the field of constructive delivery, there has been little comparative work between Chinese law and common law jurisdictions. This article therefore is to fill up the lacuna by comparing between Chinese law and English law with respect to rules of the three aforementioned sub-categories of constructive delivery. Besides, a closely related topic, i.e. the issue of symbolic delivery will be discussed afterwards. Aiming at finding similarities and differences between the two jurisdictions, this article also attempts to draw lessons both from English law for Chinese law, and from 1 Property Law 2007 (China), Arts. 6, Cochrane v. Moore (1890) 25 Q.B.D. 57 at Pynchoun v Geldeford (1385) Y.B. Hil. 8 Ric. II, at 215, pl Sale of Goods Act 1979, s See e.g. WANG Yi, 物权变动论 (On Transfer of Property Rights), Renmin University Press (Beijing), at 151 (2001). These two provisions are Contract Law 1999 (China), Arts. 140 and 135 respectively.

3 2018] A COMPARATIVE STUDY OF THE CHINESE LAW OF CONSTRUCTIVE DELIVERY 293 Chinese law to English law. It is to be hoped that this article may to some extent help draftsmen of the Book of Property of the Chinese Civil Code to have an idea about both those current rules in Chinese law that are doing very well, and those current rules in Chinese law that are needed to be reformed from a common law perspective. I. TRADITIO BREVI MANU Constructive delivery by traditio brevi manu in Chinese law is defined where: before the real right of a movable property is created or transferred, the transferee has already legally possessed the movable property, the real right shall become effective upon the effectiveness of the juridical act. 6 What appears to be unique in Chinese law compared to most of the civilian Civil Codes is that to constitute a valid traditio brevi manu under Chinese law, the transferee s pre-existing possession of the thing in question must be a legal one, by which it means the transferee s custody must be based on a valid underlying basis (such as a bailment contract), whereas under German law, 7 Dutch law, 8 Swiss law 9 or Japanese law 10 for example, such restriction does not exist. Such unique requirement in Chinese law has recently received much criticism from a number of local scholars. 11 While English law also recognizes traditio brevi manu, unlike the aforementioned civil law jurisdictions, the requirement that the prior possession must be legal as explicitly provided in Chinese law, is not clear in English law. At least among English cases of traditio brevi manu, there is hardly any case in which the prior possession is an illegal one. Take the leading case, Winter v. Winter 12 for example. A father run barge business together with his son, by which the son kept helping the father deal with the barge in question. The father later on fell ill and, given that the son had already got possession of the barge, made a verbal gift of the barge to the son. When the father died later on, another of his sons, acting as his executor, challenged the validity of the gift by contending that there had been no further physical delivery of the barge in question. Such claim failed. Wightman J said that the son used it as a servant to his father before the gift, and afterwards possessed it and worked it as an owner; a parol gift suffices to pass title to the barge where the donee has already possessed the barge beforehand. Here, the prior 6 Property Law 2007 (China), Art German Civil Code, s Dutch Civil Code, Art. 3:115(b). 9 Swiss Civil Code, Art. 922(1). 10 Japanese Civil Code, Art. 182(2). 11 See e.g. SUN Xianzhong et al., 物权法的实施 (The Implementation of the Property Law), Social Science Academic Press (Beijing), at (2013); RAN Keping, 物权法总论 (General Principles on Real Rights Law), Law Press (Beijing), at (2015). 12 (1861) 4 L.T. 639 followed by Alderson v. Peel (1891) 7 T.L.R. 418.

4 294 FRONTIERS OF LAW IN CHINA [Vol. 13: 291 possession was a legal one. Similarly, in Re Stoneham, 13 title to a quantity of old furniture, arms, and armor which was already located in a house where the transferee was living could pass verbally by the transferor to the transferee without the need of being returned and re-delivered. Again, the prior possession was a legal one because the transferee was entitled to live there and use these items in question. In other words, there is no clear authority in English law recognizing that title could pass by traditio brevi manu where the transferee s prior possession lacks the consent of the transferor. But can we simply come to the conclusion that English law is the same as Chinese law so far as the requirement of a legal prior possession is concerned? It is suggested that the answer should not be straightforwardly in the affirmative. This can be inferred from the underlying rationale of allowing traditio brevi manu in lieu of actual delivery in English law, which is for the facilitation of trade, and it would be very strange to insist upon delivery back to the donor followed by redelivery to the donee. 14 Thus, such policy-based relaxation focuses on responding not the transferee, but the transferor s intent to pass title. As a result, there is no point to treat illegal prior possession (such as wrongful detention) in a different way from legal prior possession (such as bailment), as long as the transferor does intend to pass title to such possessor, regardless of the reason why such possessor got possession previously. Similarly, it is equally difficult to see any point in Chinese law in setting the additional requirement of legal possession to deter the transferee with illegal prior possession at the expense of party autonomy and the free will of the transferor with respect to transfer of ownership. Notably, both of the two major proposals for the Chinese Civil Code elected to delete such requirement, 15 so that an illegal prior possession alone would no longer bar property transfers if any of these proposals is adopted by the legislature. It can therefore be reasonably anticipated that such additional requirement in current Chinese property law would be removed in the upcoming Civil Code Book of Property. II. TRADITIO LONGA MANU Constructive delivery by traditio longa manu in Chinese law is defined as: before the real right of a movable property is created or transferred, a third party has legally possessed the movable property, the person bearing the obligation of delivery may, by assigning the right to return, request that third party to return the original object [to the transferee] to substitutive delivery Re Stoneham [1919] 1 Ch See also Pascoe v. Turner [1979] 2 All E.R. 945; Woodard v. Woodard [1995] 3 All E.R Roger Smith, Property Law (8th edition), Pearson (Harlow), at 199 (2014). 15 WANG Liming ed. 中国民法典学者建议稿及立法理由 : 物权编 (A Propositional Version with Legislative Reasons for Civil Code Draft of China: Book of Property), Law Press (Beijing), at 66 (2005); LIANG Huixing ed. 中国民法典草案建议稿 (A Propositional Version for Civil Code Draft of China) (3rd edition), Law Press (Beijing), at 57 (2013). 16 Property Law 2007 (China), Art. 26.

5 2018] A COMPARATIVE STUDY OF THE CHINESE LAW OF CONSTRUCTIVE DELIVERY 295 The most commonly applicable scenario is where the physical custody of the thing in question is in the hands of a third party who is under a contractual duty in relation to this thing such as a duty to repair, or even a mere duty of keeping or warehousing. In English law it is also possible to complete delivery by way of traditio longa manu, though, the operations of such a fictitious method of delivery in these two jurisdictions are not exactly the same. Under the English way of traditio longa manu, the transferor s assignment of the right to specific restitution to the transferee against a third party who is currently in possession of the chattel does not constitute a valid conveyance (in the form of constructive delivery) unless that third-party possessor attorns, i.e. by some acknowledgment on the part of that possessor that he now no longer holds it for the transferor but for the transferee. 17 Whereas according to the Chinese counterpart, the assignment of the right to vindicate the movable thing by the transferor for the transferee (against a third-party possessor) does constitute a valid conveyance even if such third-party possessor is totally unaware of the act of assignment, 18 not to speak of any attornment made by the third-party possessor. This generates a significant difference between the two jurisdictions in commercial practice where a third-party mercantile agent (e.g. carrier, shipowner, wharfinger or warehouseman) is involved. In English law, in order to perfect the act of delivery, the transferee must acquire an attornment from the agent to change them from the bailee of the transferor to that of the transferee himself. The only exception in English law relates to the bill of lading; where a person receives a bill of lading representing goods to have been shipped, he can sue the carrier on presentation of the bill for delivery of the very goods against the carrier, despite that the carrier never attorned on behalf of him. The reason is, although strictly speaking, like other documents of title, the endorsement of a bill of lading is not the method to convey title, 19 it nevertheless operates, in effect, as an attornment in advance to all holders: a recognition that the goods are being held for each holder and giving the holder a right to call for delivery of the goods. 20 For other documents of title such as a ship s delivery order, however, a person holding such document cannot sue for delivery against the shipowner unless the shipowner attorned in advance. 17 Bentall v. Burn (1824) 3 B. & C. 423, 107 E.R. 791; Farina v. Home (1846) 16 M. & W. 119, 153 E.R. 1124; Mcewan v. Smith (1849) 11 H.L.C. 309, 9 E.R Goff v. Duffield (1927) 63 I.L.T.R. 17, citing Dublin City Distillery Ltd v. Doherty [1914] A.C. 823 at 852 (Lord Parker). As for transfer of title to goods by sale, Sale of Goods Act 1979, s. 29(4) applies. 18 See SUN et al., fn. 11 at 161. This is similar to German law but different to Dutch law where delivery does not complete until the possessor knows such assignment or that the notice of such assignment is sent to the possessor by either the transferor or the transferee: German Civil Code, s. 931, c.f. Dutch Civil Code, Art. 3: 115(c). 19 Borealis AB v. Stargas Ltd [2002] 2 A.C. 205 at [22] [24] (Lord Hobhouse). 20 Law Commission and Scottish Law Commission, Rights of Suit in Respect of Carriage of Goods by Sea (Law Com. No. 196 and Scot. Law Com. No. 130), Her Majesty s Stationery Office (London), at 40 (1991).

6 296 FRONTIERS OF LAW IN CHINA [Vol. 13: 291 In Chinese law, by contrast, the handing over of all kinds of document of title 21 such as a warehouse receipt, a wharfinger s certificate, a delivery order, or a bill of lading suffices to transfer ownership even without the agent s knowledge, not to speak of the agent s attornment. 22 A consequence of lacking the constituent element of third-party attornment in Chinese law is the vagueness in categorization of transfer of ownership involving documents of title. Such vagueness can be seen through the academic disagreement on whether such kind of transfer should count as a species of traditio longa manu (under the heading of constructive delivery), 23 or a species of symbolic delivery (under the heading of actual delivery). 24 Indeed, given that attornment is not a necessary condition for the Chinese version of traditio longa manu in the form of handing over document of title, what would prevent us from concluding that it simultaneously amounts to a kind of symbolic delivery? The vagueness in concept brings a further problem of practical importance: To constitute a valid transfer of ownership by handing over document of title, should the subject-matter legally possessed by the third-party agent at the moment of conveyance? 25 If the handing over in question is seen as a species of traditio longa manu, then Article 26 of the Property Law 2007 applies; the answer should be in the affirmative. Whereas if the handing over in question is seen as a species of symbolic delivery under the heading of actual delivery, then Article 26 does not apply; the answer should be in the negative. As a result, legal uncertainty arises from such vagueness. Interestingly, the two jurisdictions have one thing in common, though based on completely different underlying rationales. Where the subject-matter is in the hands of an uncertain person, as in most cases of lost or stolen property, the transferor under English law can convey title to it by the uttering of the words that the transferee will acquire the title at the moment when the transferee subsequently obtains its possession by finding. 21 A bill of lading, which logically counts as a kind of mercantile document, is an exception. As mentioned rightly above in this section, even in English law the passing of the bill of lading without the carrier s attornment constitutes a perfect delivery. 22 Property Law 2007 (China), Art Although this is a provision concerning the creation of pledge, it should apply to transfer of ownership as well given there is no explicit articulation on the contrary in the 2007 law. 23 See e.g. ZHU Yan, GAO Shengping & CHEN Xin, 中国物权法评注 (Comments on Chinese Property Law), Peking University Press (Beijing), at 156 (2007); YANG Daixiong, 拟制交付在物权公示中的效力 (On the Effects of Symbolic Delivery in Publicity of Property Rights), 6 重庆工学院学报 ( 社会科学版 ) (Journal of Chongqing Institute of Technology: Social Science Edition), 85 (2008). 24 See e.g. YANG Zhen, 观念交付制度基础理论问题研究 (Fundamental Theoretical Issues of Constructive Delivery), 6 中国法学 (China Legal Science), 73 (2008); ZHUANG Jiayuan, 基于指示交付的动产所有权移转 (Transfer of Ownership to Movables by Traditio Longa Manu), 3 法学研究 (Chinese Journal of Law), 168 (2014). 25 This constituent element will be discussed in detail in the paragraph after the next.

7 2018] A COMPARATIVE STUDY OF THE CHINESE LAW OF CONSTRUCTIVE DELIVERY 297 Accordingly, title still does not pass until the moment when the subject-matter is reduced into the possession of the transferee; it is therefore not a case of transfer by traditio longa manu, but a case of transfer by actual delivery. Its underlying rationale is quite plain: Since the possessor of the lost property is normally a complete stranger to the transferor, it is impossible for the transferor to make the possessor attorn, hence the delivery by traditio longa manu can never be completed. Thus in Thomas v. Times Book Co., Ltd., 26 Dylan Thomas, a famous poet realized that he had lost his manuscript of his play Under the Milk Wood when he arrived at the airport before departure. One Cleverdon, a broadcast producer came to see him at the terminal. Dylan Thomas then told Cleverdon some places where the manuscript could possibly be found and said that if you find it, you can keep it. Later on, Cleverdon found the manuscript and sold it to one Cox, and Cox sold it on to the defendant. When Dylan Thomas died afterwards, his administratrix brought conversion against the defendant. Apparently, the key point of this case was whether there was an effective conveyance by delivery between Dylan Thomas and Cleverdon. Plowman J concluded that when Cleverdon got possession of the manuscript with the consent of Dylan Thomas, the gift was perfected. 27 To put it in another way, without third-party attornment, title does not pass simply by the transferor s assignment of the right to get back possession of the subject-matter to the transferee. Under Chinese law, similarly, the transferor cannot pass ownership to a missing article by such a declaration of intention to convey either. Yet this is because of the wording of the legislation 28 which confines the scenario of traditio longa manu to those where the third-party prior possession must be legal. 29 The underlying rationale of this requirement in Chinese law relates to a conceptual technicality. Suppose property law allows passing of property even if the third-party possession is illegal, then it must be done by assignment of the right of vindication, rather than done by assignment of debt. However, as a traditional view in Chinese property law, while a contractual right 30 can be freely assigned to a third party, the right of vindication, as a right subordinate to its principal property right (such as ownership), by contrast, cannot be assigned to others 26 [1966] 1 W.L.R Thomas v. Times Book Company Limited [1966] 1 W.L.R. 911 at Property Law 2007 (China), Art Representing most of the scenarios where the possessor has a certain type of contractual relationship with the transferor, rather than the scenarios where the possessor is merely a stranger who takes possession of the thing in an unauthorized way. 30 E.g. a lender s right to call for re-delivery of a car against the borrower after the final day of chattel lease. In such case it is beyond question that the lender can assign this contractual right to a third person who wants to buy the very thing in lieu of actual delivery, so that the borrower just needs to return the possession to the car to that buyer.

8 298 FRONTIERS OF LAW IN CHINA [Vol. 13: 291 independently. 31 Another policy consideration of denying the assignment of the right of vindication is because that third-party possessor may have defenses based on contract with the transferor, which may bar the transferor the right to claim for possession against that third-party possessor. However, if passing of property can be done through assignment of the right of vindication, that third party s defense based on privity would not bind the transferee, simply because he does not have a contractual relationship with the transferee, which is unfair to that third-party possessor. 32 Notably however, there are increasing number of policy-motivated critiques against such unique requirement of third-party prior possession being legal. 33 It can therefore be excepted that such requirement may be deleted in the upcoming Book of Property of the Chinese Civil Code, leaving the theoretical denial of assignment of the right of vindication untouched. III. CONSTITUTUM POSSESSORIUM The third alternative of constructive delivery in Chinese law is constitutum possessorium, which is defined as: When the real right of a movable property is transferred, and both parties agree to let the transferor continue to possess the movable property, the [conveyance of] real right shall become effective upon the effectiveness of the agreement. 34 A common example is, where the transferor intends to convey the ownership to his machine to a transferee, but the transferor also wants to retain possession of machine so that he could use it for another several days, then if they decide to adopt the aforesaid 31 See e.g. LIANG Huixing ed. 中国物权法研究 (Study on Chinese Property Law), Law Press (Beijing), at 86 (1998). For a recent confirmation of such idea, see LIU Jiaan, 论通过返还请求权让与方式实现动产所有权移转 (On the Transfer of Ownership of Movables by Assignment of the Claim of Restitution), 4 比较法研究 (Journal of Comparative Law), 139 (2017). Thus, in the above scenario if the car is missing during the period of loan for use, the lender (original owner) cannot transfer title to the car to a third party purchaser by traditio longa manu (i.e. by assigning his right to vindication to the buyer), because otherwise the ownership and the right to vindication may be temporary separate from each other during the period of missing, with the former remaining in the transferor (original owner) and the latter vesting in the transferee. For the opposite view raised recently, see e.g. CUI Jianyuan, 物权法视野下的指示交付 (Traditio Longa Manu in the Eyes of Property Law), 10 法律适用 (Journal of Law Application), 17 (2014). 32 See e.g. WANG Yi ed. 物权法解读与应用 (Understanding and Applying Property Law), People s Publishing House (Beijing), at 55 (2007). By contrast, assignment of debt does not have such concern, because Contract Law 1999 (China), Art. 82 explicitly provides that the debtor s defenses against the assignor also bind the assignee. 33 See e.g. CUI Jianyuan, 物权 : 规范与学说 (Property Rights: Rules and Theories), Tsinghua University Press (Beijing), at (2011); WANG Liming, 物权法研究 ( 上卷 ) (Research on Property Law) (4th edition), Vol. I, Renmin University Press (Beijing), at 358 (2016). WANG Liming suggested that the aforementioned problem of protection of the third party possessor could be overcome by applying the nemo dat rule to the assignment of the right of vindication according to the rule of nemo dat non quod habet, no one gives what he does not have. Thus if the right of vindication held by the transferor cannot bind the third party possessor, then the transferee of such right cannot bind the third party possessor either. 34 Property Law 2007 (China), Art. 27.

9 2018] A COMPARATIVE STUDY OF THE CHINESE LAW OF CONSTRUCTIVE DELIVERY 299 way of constructive delivery in lieu of manual delivery several days later, then the transferee acquires the ownership to the machine immediately without the need of waiting for manual delivery by the transferor in the future. Though English law also recognizes constitutum possessorium as a method of conveyance, a detailed comparison below is to demonstrate the major difference between the two jurisdictions. Superficially, while English law accepts a wider scope of scenarios (for both the transfer of title/ownership and the creation of security interests) than Chinese law does, passing of property in English law by way of constitutum possessorium is only effective between the parties themselves but not viz a viz third parties whereas it is effective in both respects in Chinese law. As for the transfer of title, in Elmore v. Stone, 35 the claimant was a horse dealer and livery stable keeper. He sold two horses on credit to the defendant. They additionally agreed that after the sale the horses in question should be kept at the claimant s stable for the defendant. Later on, the defendant refused to pay for the price of the horses, as a result of which the claimant sued him for price. This claim was successful. Notably, to support his pleading, the defendant contended that his contractual obligation to pay was unenforceable due to Section 17 of the Statute of Frauds This section provided that a contract of sale with a value of over 10 was an unenforceable contract unless the goods to the contract had been delivered to the buyer or the buyer had performed his consideration for the goods in full or at least in part. 36 The crucial task for the claimant was therefore to prove a valid delivery for the purpose of the aforementioned statutory provision. While acknowledging that there was no manual delivery in this case, it was held by Mansfield CJ that after the defendant had said that the horses must be kept at the claimant s stable, and the claimant had accepted his order, the claimant possessed them from that time, not as owner of the horses, but as any other livery stable keeper might have them to keep. 37 This means, just like manual delivery, constructive delivery by way of constitutum possessorium also amounts to a valid one. This is the same as the position in Chinese law. Nevertheless, Mansfield CJ also pointed out that an effect of using constitutum possessorium was that the movables in question would be the transferor s general assets on the decease of the transferor, and so, if he had become bankrupt, they would have gone to his assignees. 38 This means, the title acquired by the transferee by way of constitutum possessorium cannot bind third parties so long as the transferee keeps having indirect possession only. This is different from the position in Chinese law, because in Chinese law, ownership acquired by way of constitutum 35 (1809) 1 Taunt. 458, 127 E.R This old provision was later on re-enacted in Sale of Goods Act 1893, s. 4, and was finally repealed by Law Reform (Enforcement of Contracts) Act 1954, s. 2, before the Sale of Goods Act 1893 being replaced by Sale of Goods Act Elmore v. Stone (1809) 1 Taunt. 458 at 460; 127 E.R. 912 at Elmore v. Stone (1809) 1 Taunt. 458 at 461; 127 E.R. 912 at 913.

10 300 FRONTIERS OF LAW IN CHINA [Vol. 13: 291 possessorium is no different from that acquired by way of manual delivery, in that it can bind third parties save for bona fide purchasers for value without notice. 39 As for the creation of security interests, English law by and large kept its position in transfer of title. The rule was well explained by Lord Atkinson that: a contract to pledge a specific chattel...is not in itself sufficient to pass...property in the chattel to the pledgee. Delivery is, in addition, absolutely necessary to complete the pledge; but of course it is enough if the delivery be constructive...instead of actual. 40 In Ancona v. Rogers, 41 a debtor assigned by an unregistered bill of sale to the creditor the right to ask for taking control over some chattels in question without manually delivering these chattels to the creditor by way of mortgage. By this agreement, the debtor still retained possession over these chattels until payment of the money was demanded. One Bishop then helped the debtor to move the chattels to another place owned by one Horlock, and Bishop then locked them up there and took the key on behalf of the debtor. Since Horlock assented entirely to what had been done to his room in his absence, it could be said that possession of the chattels in question had always remained in the debtor. Several weeks after this date, the debt became default. The creditor demanded for direct possession of these chattels but was refused by Horlock. The debtor filed for liquidation a few days later. Fearful of being unable to exercise of his right as a mortgagee and thus cannot get fully paid as the debtor s other unsecured creditors, the creditor therefore brought interpleader proceedings against the debtor s trustee in liquidation. The court of first instance dismissed the claim of the creditor. The Court of Exchequer, however, set aside that verdict and recognized the creditor as the pledgee. The trustee in liquidation thus finally appealed to the Court of Appeal, where the judgement was again reversed. The Lord Justices held that the mortgage was created by the bill of sale even though the debtor was the only person in possession of the goods. However, it was also held that if a man chooses to lend money upon a bill of sale, and does not register it, he should run the risk arising from his not being able to obtain possession of the goods before the grantor of the bill of sale commits an act of bankruptcy. 42 In other words, even though there was a valid mortgage created by way of constitutum possessorium in the form of an unregistered bill of sale, such mortgage cannot bind the mortgagor s general creditors in the event of the mortgagor s bankruptcy, due to a special statute against fraud made by secret conveyance at that time. 43 Clearly were this case applied to Chinese law (where mortgage is not recognized as a species of security 39 Property Law 2007 (China), Art Dublin City Distillery v. Doherty [1914] A.C. 823 at (1876) 1 Ex. D Ancona v. Rogers (1876) 1 Ex. D. 285 at 292. For criticisms on this judgement, see Samuel Stoljar, The Delivery of Chattels, 21 Modern Law Review, 27 (1958). 43 Bills of Sale Act 1854 (17 & 18 Vict. c. 36), which was the predecessor of the Bills of Sale Act 1878, the latter being still in force today.

11 2018] A COMPARATIVE STUDY OF THE CHINESE LAW OF CONSTRUCTIVE DELIVERY 301 interests) it should have been straightforwardly decided that the right of pledge has not been created for the creditor at the outset when the agreement involving constitutum possessorium clause took effect, as a result of which the creditor had no security interest over the debtor s trustee in bankruptcy with respect to the chattels in question, 44 and therefore had to join the queue as an unsecured creditor. In other words, the trustee in liquidation did not need to rely on that special statute (Bills of Sale Act 1854) at all. This is because unlike transfer of ownership, a pledge cannot be created by way of constitutum possessorium under Chinese law in the first place. 45 As a result, the subsequent question whether or not there is any form of publicity with respect to the agreement stipulating constitutum possessorium in order to have third-party binding effect is irrelevant at all. In addition, a minor difference between the two jurisdictions is that, compared to Chinese law, the criteria of proving the constitutum possessorium agreement is stricter in English law. In Chinese law, as long as there is an agreement reached between the parties, whether verbal or in writing, the court is generally willing to recognize the existence of such agreement of constitutum possessorium. In English law, by contrast, such agreement of constitutum possessorium must be manifested by some sorts of outward appearances to prove the fact that the character of possessor in question has been changed from an owner to a bailee. A change of stable specifically for bailment would be fine to prove the agreement of constitutum possessorium, 46 whereas an unchanged entry in the books would be problematic. 47 A memorandum document would be sufficient to prove the agreement of constitutum possessorium, 48 whereas a delivery order or warrant would be insufficient, because these normally gives no indication whether the one executed these documents did in the character of an owner or a bailee. 49 Another minor difference between the two jurisdictions is that constitutum possessorium in Chinese law can also be employed to convey future-acquired property while that in English law cannot. An example given by the Chinese legislature, though 44 Though Chinese law does not have a bankruptcy regime for natural legal persons as opposed to artificial legal persons, and the office-holder of the bankrupt is not called trustee but administrator : Enterprise Bankruptcy Law 2006 (China), Arts. 2, Although there is no explicit negation in Property Law 2007 (China), Art. 212, it is the prevailing academic view that such negation could be inferred from the Judicial Interpretation of the Supreme People s Court on Some Issues Regarding the Application of Surety Law (Judicial Interpretation No. 44, 2000) Art. 87. See e.g. WANG, fn. 33 at 1314; CUI Jianyuan, 物权法 (Real Right Law), Renmin University Press (Beijing), at 518 (2011). LIANG Huixing & CHEN Huabin, 物权法 (Real Right Law), Law Press (Beijing), at (2010). 46 Marvin v. Wallis (1856) 6 E. & B. 726, 119 E.R. 1035, citing Elmore v. Stone (1809) 1 Taunt. 458, 127 ER Carter v. Toussaint (1822) 5 B. & A. 855, 106 E.R. 1404, c.f. Castle v. Sworder (1861) 6 H. & N. 828, 158 E.R In re Hardwick (1886) LR 17 Q.B.D Townley v. Crump (1835) 4 A. & E. 58, 111 E.R. 709; Dublin City Distillery v. Doherty [1914] A.C. 823.

12 302 FRONTIERS OF LAW IN CHINA [Vol. 13: 291 extra-legislatively, is where A entered into a contract to purchase B a machine which at that time had not yet been produced, and where they also agreed that when the very machine is produced, B shall take good care of it on behalf of A, then A acquires ownership to the very machine at the moment of production by constitutum possessorium, without the need to receive any additional actual delivery from B to complete the conveyance. 50 Such expansion cannot be found in English cases. IV. TRADITIO SYMBOLICA Unlike the three topics discussed above, vagueness in English law under this heading is so severe that a critical review is necessary before making comparisons or drawing lessons for Chinese law. Traditio symbolica, or symbolic(al) delivery, is strictly speaking not the fourth sub-species of constructive delivery, which generally comprises traditio brevi manu, traditio longa manu, and constitutum possessorium. 51 Rather, it relates to another contrast under the heading of actual delivery (just as opposed to constructive delivery), which can be traced back in Roman law. This is the contrast between traditio ficta (symbolic delivery) and traditio vera (manual delivery) by whether there is any change of direct possession (control) of the subject-matter happened in the transfer of property. 52 Confusingly, however, the term traditio ficta literally means fictitious delivery in English, 53 and there is no substantial difference between constructive delivery and fictitious delivery in terms of their meanings in English. It then bizarrely follows that the term constrictive delivery and symbolic delivery should by and large be the same thing in English legal texts; symbolic delivery is both a way of actual delivery and a way of constructive delivery, which does not make any sense. The conceptual problem therefore, lies in what the term symbolic delivery actually means as a form of delivery with the effect of passing of property. In English law, there are two categories of symbolic delivery in its loose sense, 54 based on a division of things used to symbolize the handing over possession of the subject-matter of conveyance. Category I of symbolic delivery refers to scenarios where 50 Civil Law Branch of the Law Commission of the SCNPC ed. 中华人民共和国物权法 : 条文说明 立法理由及相关规定 (PRC Property Law: Provision Explanations, Legislative Rationales and Relevant Rules), Peking University Press (Beijing), at 41 (2007). 51 Notably traditio sine manu, meaning delivery without hand, might be roughly said to be the fourth form of fictitious transfer of possession: Vincent Sagaert, Consensual versus Delivery Systems in European Private Law: Consensus about Tradition?, in Wolfgang Faber & Brigitta Lurger eds. Rules for the Transfer of Movables, Sellier (Berlin), at 34 (2008). 52 See e.g. W.W. Buckland & Peter Stein, A Text-Book of Roman Law: From Augustus to Justinian (3rd edition), Cambridge University Press (Cambridge), at 232, fn. 1 (1963). 53 Sjef van Erp & Bram Akkermans eds. Cases, Materials and Text on National, Supranational and International Property Law, Hart Publishing (Oxford), at 814, fn. 52 (2012), saying that the commentators (13th 15th century) called such a form of traditio fictitious (traditio ficta), citing J. Biermann, Traditio Ficta, Ferdinand Enke (Stutttgart), at 71 (1891). 54 Chaplin v. Rogers (1800) 1 East. 192 at 195; 102 E.R. 75 at 76 (Lord Kenyon CJ).

13 2018] A COMPARATIVE STUDY OF THE CHINESE LAW OF CONSTRUCTIVE DELIVERY 303 the symbol is something by which the transferee can have access, or take control of the subject-matter of conveyance. Category II of symbolic delivery refers to scenarios where the symbol is something purely symbolic; the transferee cannot have access, or take control of the subject-matter of conveyance by possessing the very symbol. This could also be called symbolic delivery in its strict sense. Are both of these two categories effective to pass title to the very subject-matter? The answer to Category I of symbolic delivery is in the affirmative. One common-sense example is the handing over of the key to a chest which suffices to be an effective actual delivery of the chest, so long as the transferor s intent to convey is inclusive of all the property rights over the things in the chest. 55 A special case is the transfer of title to goods under carriage by sea, since in such scenario even the transferor does not have actual possession over the chattels. Nevertheless, he can effectively complete delivery by handing over the bill of lading to the transferee without the need to regain physical possession; a delivery of all the muniments 56 and means of reducing a ship or cargo at sea into possession is in law a delivery of them. 57 The reason for such an affirmative answer is plain. Just because of the fact that means to possession were given to the transferee in the two examples above, it may well be argued that strictly speaking Category I is not symbolic at all. On the one hand, Category I in reality amounts to a form of actual delivery, on the other, it could be said as a form of constructive delivery. 58 As for overlapping actual delivery, for example, if a seller gives keys to his car to a buyer, with the intent to pass title to the very car to the buyer, it makes more sense to say this amounts to actual delivery rather than symbolic delivery, because in practice there is no substantial difference between the buyer holding the keys to the car and the buyer actually sitting in the car. The reason why handing over keys amounts to a valid conveyance by delivery can be explained by rules of actual delivery, without the need to additionally employ such Category I of symbolic delivery. As for overlapping constructive delivery, similarly, if a purchaser acquires title to cargo by endorsement of a bill of lading, the reason why the purchaser receiving title documents amounts to a valid conveyance by delivery can be explained by rules of traditio longa manu, i.e. attornment by a third party (the carrier) in possession already discussed above, without the need to 55 Lucas v. Lucas (1738) 1 Atk. 270, 26 E.R. 172; Webb v. Whinney (1868) 18 L.T By analogy, the handing over of a key is also effective to create a right of pledge which requires passing of possession: Wrightson v. McArthur & Hutchisons Ltd. [1921] 2 K.B Nevertheless, effective delivery may not be recognized if the transferor retains a duplicate key, for such retention implies the fact that the transferor still has full control over the property: Re Craven s Estate [1937] Ch I.e. documents that prove one s title, which is the bill of lading in this case. 57 Ryall v. Rowles (1750) 1 Ves. 348 at 362; 27 E.R at However, the law was modified over a century later when the House of Lords held that such a way of delivery of goods by endorsement and delivery of the bill of lading no longer applies to the case where the transferee provided no consideration in return: Sewell v. Burdick (1884) 10 App. Cas. 74 at (Lord Selborne). 58 See e.g. Elmore v. Stone (1809) 1 Taunt. 458, 127 E.R. 912 (Mansfield CJ).

14 304 FRONTIERS OF LAW IN CHINA [Vol. 13: 291 additionally employ such Category I of symbolic delivery either. Unfortunately, English judges sometimes did use the label symbolic delivery to explain conveyances by delivery via endorsement of a bill of lading. 59 To avoid vagueness and redundancy in legal concepts, it is therefore submitted that symbolic delivery in its strict sense should be nothing to do with means to control of the very subject-matter, for example, the handing of a photograph of the car without giving the keys. To put it in another way, it is suggested that Category II of symbolic delivery should be the genuine symbolic delivery. However, the answer to whether such Category II of symbolic delivery is effective to pass title is not straightforward, because clues in case law are somewhat chaotic and inconsistent. On the one hand, in Lock v. Heath 60 it was said that the delivery of a chair with the donor s intent to pass title to all furniture of the entire house where the chair was located in was perfectly effective to pass title to furniture. In Rawlinson v. Mort 61 it was also reported that transferor can pass title to an organ even by simply touching it in the face of the transferee with an intent to convey or by handing over the bailee s letter and three receipts. On the other hand, in Re Cole where a husband took his wife to a new home, uncovered her eyes and said Look, and said It s all yours after guiding his wife over the two floors, and also watched her physically handled a silk carpet and a card table there, the Court of Appeal still held that the wife acquired title to none of these new furniture bought by her husband. 62 It is difficult to see that there is a substantial distinction between the former acts of handing over a chair, touching the organ, and the latter act of guiding the transferee in presence of the chattels and letting the transferee herself to touch those. If a test in respect of a threshold for effective symbolic delivery must be drawn, the answer might lie in the fact whether the transferee is solely in possession of that symbol, for in Kilpin v. Ratley, a case similar to re Cole, the reason why the wife successfully acquired title to furniture is simply that the wife was left alone in the room when his father-in-law orally gave her those furniture in the room and then walked out of the room. 63 However, to take such analysis it equally means that the moment when the transferee acquires title is the moment when the transferee takes sole and exclusive control over the property, while the transferor relinquishes his control over the property, which is just the point traditio vera being distinct from traditio ficta. This would therefore again turn Lock v. Heath, Kilpin v. Ratley, and Re Cole to be cases of actual delivery rather than symbolic delivery. Perhaps the only pure authority for symbolic delivery left to be Rawlinson v. Mort. However, if we take a closer look at its judgment, we will find it not strong enough in the sense of establishing the doctrine of symbolic delivery. A parishioner bought an organ and 59 See e.g. Sanders Brothers v. Maclean & Co (1883) 11 Q.B.D. 327 at 341 (Bowen LJ). 60 Lock v. Heath (1892) 8 T.L.R Rawlinson v. Mort (1905) 21 T.L.R Re Cole [1964] Ch See also Bourne v. Fosbrooke (1865) 18 C.B. N.S. 515, 144 E.R Kilpin v. Ratley [1892] 1 Q.B. 582.

15 2018] A COMPARATIVE STUDY OF THE CHINESE LAW OF CONSTRUCTIVE DELIVERY 305 erected it in a church. He told the vicar that he only intended to lend the organ to the church, so the vicar wrote a letter confirming the loan of the organ. Later, the parishioner found the organist of the church playing the organ very well and went to his room (not at the church) saying that he wishes to transfer title to the organ to him as a gift. In doing so, the parishioner handed the organist the vicar s letter together with three receipts for the purchase money of the organ as indicia of title. On a subsequent occasion, when the organist was playing the organ at the church, the parishioner said to the churchwarden in the presence of the organist confirming such transfer (by words like I have given, or I give this to the transferee). A few years later, the organist heard that the church was about to remove the organ without paying anything to him, because the church repudiated the organist s title to the organ. The organist thus brought detinue 64 against the vicar and the churchwarden for a declaration of title and thus restitution in kind or monetary value of the organ. The defendants counsel pleaded that there was no actual delivery between the parishioner and the organist to complete the transfer, because the actual possession of the organ was always remained in the church by virtue of loan. Such plead was denied by the trial judge, Bray J, who said that: I think the handing over of...the indicia of the property, is symbolic delivery and equivalent to actual delivery, at all events where manual delivery is practically impossible. It was not the intention of the donor or the donee that the organ should be removed from the church, and real manual delivery was impossible under these circumstances. In my opinion, there was a valid completed gift at the plaintiff s rooms. I am, however, of opinion that, if the gift was not completed then, it was completed at the church. 65 This is a bit difficult for readers to find the law, because Bray J was not so sure, or he did not need to, due to facts of this case, be explicit in telling exactly when title passed by a valid delivery Had the parishioner did not subsequently touch the organ in the church and expressed his intent to donate the organ in the present of the churchwarden and the plaintiff, would title to the organ have already passed to the plaintiff at his room by handing over of the letter and the receipts as symbolic delivery? It is difficult to tell. This point therefore makes Rawlinson v. Mort a weak authority in the sense of establishing the doctrine of symbolic delivery, because if the answer to the previous question is in the negative, then antagonists would argue that what happened later in the church was a form of actual delivery the organist was actually controlling the organ when the parishioner were saying words of gift. Even if Rawlinson v. Mort is treated as a strong authority, it must be noted from Bray J s statement that Category II of symbolic delivery does not apply to all scenarios of 64 Roughly equivalent to the claim of Roman vindicatio and its offspring in Civil Law (in Chinese law for example, being 原物返还请求权 排除妨碍请求权 消除危险请求权 in Property Law 2007 (China), Arts ), though it is not exactly the Common Law version of vindication: Simon Douglas, Liability for Wrongful Interferences with Chattels, Hart Publishing (Oxford), at (2011). 65 Rawlinson v. Mort (1905) 21 T.L.R. 774 at 775.

16 306 FRONTIERS OF LAW IN CHINA [Vol. 13: 291 transfers by delivery; it is nevertheless confined to cases where manual delivery is practically impossible. One can transfer title to large items like an organ in the church by handing over symbols such as receipts, but one cannot replace actual delivery by the same way if the subject-matter is something easily movable. Indeed, only by recognizing such restriction can Rawlinson v. Mort be in line with the old famous anti-symbolic-delivery authority, Ward v. Turner, 66 where Lord Hardwicke strongly opposed such alternative way of delivery: It is argued, that though some delivery is necessary, yet delivery of the thing is not necessary, but delivery of anything by way of symbol is sufficient: but I cannot agree to that; nor do I find any authority for that in the civil law, which required delivery to some gifts, or in the law of England, which required delivery throughout...yet notwithstanding, delivery of the key of bulky goods...has been allowed as delivery of the possession, because it is the way of coming at the possession, or to make use of the thing: and therefore the key is not a symbol, which would not do. 67 In Chinese law, symbolic delivery is not a legally recognized way of delivery either under the heading of actual delivery or constructive delivery. This makes the discussion on symbolic delivery in Chinese law a distraction from a positive perspective. The real question is, therefore, whether Chinese law should adopt symbolic delivery as an independent, alternative way of delivery from a reformist perspective. It is submitted that the answer should be in the negative. There are at least two reasons for this argument. First, to accept symbolic delivery would be conceptually fatal to our system of transfer of ownership to movables. As is well known in China, so far as transfer of movables is concerned, Chinese property law adopted the traditio (delivery) system as opposed to the consensual system in the sense that as a starting point, ownership does not pass by parties solo consensu without physical delivery of direct possession; the aforementioned three ways of constructive delivery are merely exceptions to this general rule. 68 The underlying rationale of it is the celebrated principles of publicity and public faith: Since possession is the way of reflecting publicity of property holding, and since delivery is the way of reflecting publicity of property transfers, the role of possession and delivery cannot be neglected should the law is to protect third parties public faith on property rights. Now if Chinese law accepted symbolic delivery, this would mean that the 66 (1752) 2 Ves. Sen. 431, 28 E.R This was recognized as the leading case in Frederick Pollock & Robert Samuel Wright, An Essay on Possession in the Common Law, Clarendon Press (Oxford), at 62 (1888). 67 Ward v. Turner (1752) 2 Ves. Sen. 431 at ; 28 E.R. 275 at 282. For academic critiques against symbolic delivery, see Aubrey L. Diamond, When Is a Gift?, 27 Modern Law Review, 357 (1964). 68 Property Law 2007 (China), Arts. 6, 23. For the prevailing understanding in both the legislative branch and the judicial branch that the word delivery as the starting point only means change of direct possession not indirect possession, see e.g. Civil Law Branch of the Law Commission of the SCNPC, fn. 50 at 36; WANG Shengming ed. 中华人民共和国物权法解读 (Interpretation of the PRC Property Law), China Legal Publishing House (Beijing), at 53 (2007); HUANG Songyou ed. 中华人民共和国物权法条文理解与适用 (Understanding and Applying Provisions of the PRC Property Law), People s Court Publishing House (Beijing), at 112 (2007).