Lloyd's Maritime and Commercial Law Quarterly
“ROMALPA” CLAUSES
Clough Mill Ltd. v. Martin
The case of Clough Mill Ltd. v. Martin
1 is the latest in a series of cases dealing with reservation of title or “Romalpa clauses”2. It concerns four contracts relating to the sale of yarn by Clough Mill Ltd. to Heatherdale Fabrics Ltd. between December 1979 and March 1980. On 11th March a receiver was appointed by the debenture holders and on that date part of the purchase price on each of the four yarn contracts remained outstanding, although 375 kgs of unused yarn valued at £1,190 remained on the buyer’s premises. Clough Mill sought to rely upon its retention of title clause (Condition 12) incorporated into its standard conditions of sale which provided:
“However, the ownership of the material shall remain with the Seller, which reserves the right to dispose of the material until payment in full for all the material has been received by it in accordance with the terms of this contract or until such time as the Buyer sells the material to its customers by way of bona-fide sale at full market value.
If such payment is overdue in whole or in part the Seller may (without prejudice to any of its other rights) recover or re-sell the material or any of it and may enter upon the Buyer’s premises by its servants or agents for that purpose.
Such payment shall become due immediately upon the commencement of any act or proceeding in which the Buyer’s solvency is involved.
If any of the material is incorporated in or used as material for other goods before such payment the property in the whole of such goods shall be and remain with the Seller until such payment has been made, or the other goods have been sold as aforesaid, and all the Seller’s rights hereunder in the material shall extend to these other goods”.
The receiver refused to give up the yarn and instead allowed it to be used in a manufacturing process. An action was brought in conversion for damages against the receiver who, it was claimed, was personally accountable.
The decision given by Judge O’Donoghue at first instance3 appeared to have left few of the Romalpa principles subsisting. The learned judge held that Condition 12 should be read as a whole and that even the first part of the clause retaining title to goods in specie constituted a charge which was void for lack of registration under s. 95 of the Companies Act 1948. This approach was in stark contrast to several cases4 in which it had consistently been held that unsold goods supplied under a retention of title clause which were identifiable5 and still in the possession of the “Romalpa-type” buyer on the date of the appointment of the receiver belonged to the supplier, since crystallization of
1 Court of Appeal (Sir John Donaldson, M.R., Oliver, L.J. and Robert Goff, L.J.): 15th November 1984.
2 The reported English cases include Aluminium Industrie Vaasen B. V. v. Romalpa Aluminium Ltd. [1976] 1 W.L.R. 676; Re Bond Worth [1980] Ch. 228; Borden (U.K.) Ltd. v. Scottish Timber Products Ltd. [1981] Ch. 25; Re Peachdart Ltd. [1984] Ch. 131; Hendy Lennox (Industrial Engines) Ltd. v. Grahame Puttick Ltd. [1984] 1 W.L.R. 485; Re Andrabell Ltd. [1984] 3 All E.R. 407.
3 [1984] 1 All E.R. 721.
4 See for example Re Peachdart, supra; Hendy Lennox, supra; Re Andrabell, supra.
5 Even ordinary reservation of title clauses give rise to problems of identification, and it is important that good stock records are kept. This factor was emphasized in the judgment of Tadgell, J., in the Supreme Court of Victoria in Ralph McKay Ltd. v. International Harvester Australia Ltd., No. 9741 of 1982, judgment delivered 11th November 1983.
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