How to ensure successful retention of title (ROT)

In a recently reported case, the claimant (S) had supplied clothing to a re-seller (B). The contract contained an “all monies” retention of title (ROT) clause. B went into administration. The administrator sold a quantity of stock supplied by S. S claimed the value of that stock from the administrator personally, alleging (a) that it had not been paid for, (b) that it still belonged to S because of the ROT clause, and (c) that the administrator was therefore liable for conversion.

The High Court rejected the claim. It was common ground that B had the right to re-sell stock supplied by S. The ROT clause did not expressly terminate that right, or give S the power to do so, in the event of B going into administration. The administrator therefore had the right to re-sell. There had been no conversion. S could only claim in the administration as an unsecured creditor.

It is vitally important to get your ROT wording right, especially where it is the only safeguard against the buyer’s insolvency. In this case, the absence of a few words made the difference between recovery and non-recovery.

Case: Bulbinder Singh Sandhu (trading as Isher Fashions UK) v Jet Star Retail Limited (trading as Mark One) (in administration) and others [2010] EWHC B17 (Mercantile) .