Court of Appeal considers whether retention of title clause prevents claim for the price of goods

01/11/13

Caterpillar (NI) Limited v. John Holt & Co (Liverpool) Ltd. [2013] EWCA Civ 1232

On 17 October 2013 the Court of Appeal gave judgment on an appeal from a decision of Popplewell J granting summary judgment to the Claimant ("Caterpillar") on a claim of approximately US$12 million as the price of generators and spare parts sold to the Defendant ("Holt").

Caterpillar's standard terms and conditions contained a retention of title clause which provided that "... title shall not pass to Buyer until Seller has received payment in full for the products ... . Prior to title passing Buyer shall be entitled to resell or use the products in the ordinary course of business and shall account to the Seller for the proceeds of Sale".

Patten and Floyd LJJ allowed Holt's appeal on the ground that the retention of title clause, properly construed, had the effect that: (1) Holt was entitled to sell the goods to its Nigerian subsidiary before paying Caterpillar for them; (2) the sub-sales were carried out by Holt as Caterpillar's agent; (3) no title in the goods passed to Holt; and (4) Caterpillar was unable to bring an action against Holt for the price of the goods under section 49(1) of the Sale of Goods Act 1979. Patten and Floyd LJJ held that Caterpillar's remedy against Holt in these circumstances was a claim for an account of the entire proceeds of the sub-sales of the goods to Holt's Nigerian subsidiary.

Longmore LJ gave a dissenting judgment in which he held that, on the proper construction   of the retention of title clause: (1) on the sub-sales of goods prior to payment Holt did not act as Caterpillar's agent; (2) Holt acquired title to the goods; and (3) Caterpillar was entitled to claim the price of the goods from Holt. In reaching that conclusion, Longmore LJ distinguished the well known Romalpa case, and relied upon other provisions in Caterpillar's standard terms and the uncommercial consequences of Holt's interpretation.

Also, Caterpillar contended that it was entitled to claim the price of the goods even though section 49 of the 1979 Act did not apply.  Although it acknowledged the existence of conflicting Court of Appeal authorities on the point, the Court of Appeal held that no claim for the price of goods could be brought unless section 49 applied.

The Court of Appeal recognised the general public importance of the issues by granting Caterpillar permission to appeal to the Supreme Court.

The judgment is here.