Court of Appeal overturns Commercial Court on construction of retention of title clause

In a recent decision the Court of Appeal found, by a majority, that the effect of a retention of title clause was that the buyer resold the goods as agent of the seller (and not as principal, as the Commercial Court had found): Caterpillar (NI) Ltd v John Holt & Company (Liverpool) Ltd [2013] EWCA Civ 1232.  As such, the buyer would have to account for the entire proceeds of re-sale and not merely the amount due under the contract. However, since title in the goods had not passed to the buyer, the seller could not maintain an action for the price, which was the only basis on which its claim had been brought. The Commercial Court’s order granting summary judgment on the seller’s claim was therefore overturned.

Of particular note in this decision is the conflict between what the majority and dissenting judges found to be the “commercial” construction of the retention of title clause.  Permission to appeal to the Supreme Court has however been granted so, if the appeal is pursued, it will be interesting to see how the matter is finally resolved. Joanne Keillor and Akanksha Bhagat consider the case below. Continue reading

Court of Appeal found agreement to pay instalments excluded right of set-off

The Court of Appeal has held that a settlement agreement, in which the defendant acknowledged that a debt was payable in full and agreed the mechanics and timing of payments, had the effect of excluding the defendant’s right of equitable set-off: IG Index Ltd v Ehrentreu [2013] EWCA Civ 95. The claimant was therefore entitled to summary judgment on the debt. The defendant however remained free to pursue his cross-claim for damages against the claimant.

This decision is surprising in suggesting that a right of set-off may be excluded by implication where an agreement sets out not only the quantum of a liability but also the mechanics of how and when the debt is to be paid. This is contrary to previous authority to the effect that if set-off is to be excluded by contract, clear and unambiguous language is required. Parties who wish to exclude the possibility of set-off would therefore be well-advised to include an express contractual provision to that effect. Equally, where it is intended that there should be a right of set-off, it would seem sensible to say so expressly. Continue reading

Commercial Court upholds “no set-off” clause

In a recent decision, the Commercial Court granted summary judgment on a seller’s claim for approximately US$12 million as the price due under a commercial supply contract. The court found that a “no set-off” clause in the seller’s standard terms and conditions was effective to prevent the buyer relying on a defence of set-off in respect of its claims in excess of US$53 million for the seller’s alleged breaches of contract: FG Wilson (Engineering) Limited v John Holt & Company (Liverpool) Limited [2012] EWHC 2477 (Comm).

The decision is of interest for its consideration of when a seller can bring an action for the price and the question of when no set-off clauses are likely to be found reasonable for the purposes of the Unfair Contract Terms Act 1977 (UCTA), as well as its implications for the drafting of no set-off clauses. The buyer has applied for permission to appeal and a decision is awaited. Continue reading