A retention of title clause is a term in a supplier's standard conditions of sale that keeps legal ownership of the goods with the supplier until they have been paid for. If the customer goes into administration or liquidation while the goods are still on site, unpaid, identifiable and unmixed, the supplier can reclaim them outright. The supplier steps outside the unsecured-creditor queue (which typically recovers 1p to 3p in the pound) and recovers the physical goods themselves.
The legal foundation is section 19 of the Sale of Goods Act 1979 and the line of cases beginning with Aluminium Industrie Vaassen BV v Romalpa Aluminium Ltd [1976] 1 WLR 676. The line between a clause that works and one that fails is well-mapped: simple and all-monies clauses on unmixed goods survive; extended and proceeds clauses are generally re-characterised as unregistered charges and fail. Below: the four sub-types, the leading cases, what an administrator will require, and what to do on day one.
Section 17 of the Sale of Goods Act 1979 says that property in goods passes to the buyer when the parties intend it to pass. Section 19 then allows the seller to reserve the right of disposal of the goods until conditions imposed by the seller are met. Together, these two sections allow a supplier to keep legal title until the goods are paid for, regardless of physical possession having transferred to the buyer.
In normal trading, this matters little: the buyer pays on the invoice due date, and the question of who owned the goods between delivery and payment never arises. It matters acutely on the buyer's insolvency. Without retention of title, the supplier is an unsecured creditor for the unpaid price and joins a queue that typically recovers between 1p and 3p in the pound. With a valid retention of title clause, the supplier remains the owner of the goods; the administrator's right to possess the goods does not extend to a right to sell them or treat them as part of the insolvent estate.
A retention of title clause is not a charge. It does not need to be registered at Companies House. It does not appear on the customer's filed accounts. It is invisible to other creditors and to credit-reference checks. The whole power of the clause is that the goods never become the customer's property in the first place, so the customer has nothing to charge or pass on.
Retention of title clauses come in four common shapes. The first two work cleanly in English insolvency. The second two have largely been re-characterised by the courts as unregistered charges and fail.
Reserves title to the specific goods until the price of those goods is paid. Upheld in Clough Mill Ltd v Martin [1985] 1 WLR 111: the Court of Appeal held that a simple clause was a straightforward exercise of the section 19 right and did not create a charge. This is the most reliable form. It survives administration, it does not need registration, and the customer cannot defeat it by simply not paying.
Reserves title to all goods supplied until all sums owed by the customer to the supplier, on any account, have been paid. Practical effect: each delivery is treated as a continuing supply on the same title-reservation terms, so the supplier's claim survives part-payments and rolling balances. Upheld by the House of Lords in Armour v Thyssen Edelstahlwerke AG [1990] 3 All ER 481 (Scottish case, but applied across the UK). The all-monies clause is the gold standard for trade suppliers because it sweeps in every unpaid invoice on the account, not just the invoices that match identifiable goods on site.
Attempts to extend title to new products that the customer manufactures using the supplied goods (the leather becomes a handbag; the resin becomes chipboard; the steel becomes a finished part). Generally fails. The new product is a different thing from the supplied goods, owned by the manufacturer, with the supplier reduced to a security interest over it. That security interest is treated as an unregistered charge under section 859H of the Companies Act 2006 and is void against an administrator. The leading cases are Re Peachdart Ltd [1984] Ch 131 (leather to handbags) and Borden (UK) Ltd v Scottish Timber Products Ltd [1981] Ch 25 (resin to chipboard). A narrow exception in Hendy Lennox v Grahame Puttick [1984] (diesel generators bolted into ships, still identifiable, still removable) shows that physical reversibility can keep title alive; once reversibility is gone, so is the clause.
Attempts to claim the cash proceeds when the customer sub-sells the supplied goods to a third party. The original Romalpa case allowed a proceeds claim on the unusual facts (the buyer was an agent for the seller and held the proceeds in a separate account on trust), but the courts have largely refused to follow it. Compaq Computer Ltd v Abercorn Group Ltd [1991] BCC 484 held that a proceeds clause was a charge over book debts and, unregistered, void against the administrator. The practical position is that a proceeds claim only works if the clause is registered as a charge, which suppliers almost never do.
Even a properly drafted clause is useless if the goods cannot be identified at the customer's premises. The supplier must be able to point to specific goods and say "those are mine, here is the delivery note that shipped them, here is the invoice that remains unpaid". This is straightforward when the goods are large, distinctive, and serialised (machinery, electronics, branded packaging). It is much harder when the goods are bulk commodities that have been put into a common bin with stock from other suppliers.
The Sale of Goods (Amendment) Act 1995 partially helps by allowing the supplier to retain an undivided share in a bulk to which the supplied goods have been added (where they remain in the same physical state as supplied). This works for grains, liquids, and other fungibles. It does not save claims where the goods have been processed into something else.
Practical steps that protect identification: serial numbers on every unit, distinctive packaging or labelling, batch codes recorded on the delivery note, photographs of stock arrangements at the customer's premises during account reviews, and a contractual obligation on the customer to store the supplier's goods separately. The last of these is rarely complied with in practice but provides a useful argument that the customer was in breach of contract at the moment of mixing.
The administrator's first communication to creditors normally arrives within a week of appointment and includes a standard retention of title claim form. The form is the easiest route, but suppliers can also submit a free-form claim. Either way, the administrator will want:
The administrator will inspect the stock, cross-check the documentation, and either accept the claim and release the goods, accept the claim and pay the price (commonly where the administrator wants to sell the business as a going concern and needs the stock), or reject the claim with reasons. Administrators often charge a handling fee for segregating, inspecting and releasing reclaimed stock; the fee should be proportionate to the actual work done.
Where the administrator continues to use or sell goods after being notified of a valid retention of title claim, the supplier may have a personal claim against the administrator for conversion. In practice, most administrators take retention of title claims seriously precisely because of this risk.
A common pattern in administrations is that the administrator markets the business for sale as a going concern in the first few weeks. The acquirer typically wants the existing stock as part of the deal, because without stock the business cannot trade from day one of the new ownership. If the stock changes hands as part of the going-concern sale, the supplier's retention of title claim against the new owner is much harder: the new owner is usually a bona fide purchaser for value without notice of the supplier's claim, and section 25 of the Sale of Goods Act 1979 generally protects them.
The remedy is to claim early and claim loudly. A retention of title notice delivered to the administrator before the going-concern sale completes puts the administrator on notice of the supplier's title and ensures that any stock sold as part of the deal is sold subject to the supplier's claim (or, more commonly, that the supplier is paid out of the sale proceeds for the value of the reclaimed stock). A claim that lands two weeks after the sale completes is materially weaker.
The administration is published in the London (or Edinburgh/Belfast) Gazette under category 24 and on the customer's Companies House record within hours of the appointment. The supplier's window of useful action is short.
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