Company Administration is something that's regularly in the news and surrounds stories of businesses, large and small, struggling to continue...
A retention of title (ROT) claim is a clause in a sale contract which means that the seller still has ownership of the product until certain obligations are met by the buyer – ie payment.
Retention of Title
In our capacity as Liquidators/Administrators we deal with many Retention of Title Claims. In order to succeed in a Retention of Title Claim the Supplier must first show that:-
- A Contract between them and the Insolvent Company included a Retention of Title clause.
- That, that clause was one of the Contractual Terms.
- That the Supplier can identify the goods they are Claiming has been supplied by them.
- That where necessary, goods supplied can be identified against unpaid invoices.
Where a supplier wishes to make a claim we send them a questionnaire requesting copy documents; copy of terms and conditions, evidence that the terms and conditions were incorporated in the contract between the parties.
Unpaid Invoices
Where we are satisfied that the Suppliers terms and conditions will apply and they have a valid Retention of Title Claim they will be asked to attend the company’s premises and identify their goods with our agent present. At that point those goods are normally put to one side. Problems arise for Suppliers who cannot show that their terms and conditions were incorporated into the Contract which means that the claim is rejected out of hand or where they cannot identify their goods. We frequently hear from suppliers that they are the “Sole Supplier” of a particular item only to find on closer inspection that the Insolvent Company had been obtaining supplies of these items from 2 or 3 suppliers it is often because they have been on stop with the ROT claimer. This is less of a problem where we are dealing with expensive items which often have serial numbers either on the goods themselves or on the packaging. However with less valuable items with no serial numbers, it would be impossible to identify who supplied them or when. Another area of conflict arises when suppliers claim an “all monies” clause in the contract. By this they are attempting to claim Retention of Title over all goods that they have supplied. Thus you could have a situation where the only goods left in the warehouse are goods they supplied 4 years ago but none the less because there was a sum due to them they have a valid claim over those goods. This will work unless the account between the 2 parties has been zeroed within the 4 year period. In other words if the Company has at any stage paid the supplier in full and no longer owes them any money then the Title will have passed in all the goods supplied up to that point. If the supplier wishes to claim otherwise then what they have created a security interest which should have been registered at Companies House as a charge. If it has not been registered at Companies House then it will be void for want of registration as against the Liquidator or Administrator. Retention of Title Claims normally fail for one of two reasons:-
- Failure to prove that the Suppliers terms and conditions are incorporated in the Contract between the parties. The easiest way to ensure that you have evidence of this is when a trade account is opened or a credit limit extended, a director of the company has to sign to acknowledge that they have accepted Suppliers terms and conditions of trade.
- The Supplier is unable to identify the goods that they have been supplied by them, or is unable to identify specific goods or specific unpaid invoices.