I have a short note here which may sum up the situation and at the same time illustrate the point that this is a matter which is dealt with case by case. I would emphasise, however, that reservation of title clauses are recognised in our insolvency law. On the question of whether the Bill should provide for it, I should point out that it is a subject which is not restricted to bankruptcy. It comes under the headings of securities and the registration of charges.
The legal position is as follows. Property in goods passes from seller to buyer when the parties intend it to pass and thus is a matter of contractual agreement. It is possible therefore to reserve the passing of ownership as a means of giving security to the seller for the price of the goods or other debts due to him. The potential value of these reservation of title clauses as a form of security has been recognised in a number of cases. The tendency in both England and Ireland has been to place restrictions on retention of title clauses. If the nature of the contract indicates that ownership has passed, the reservation of title clause is irrelevant. In all cases a preliminary question arises as to whether or not the clause forms part of the agreement between the parties. Members will be aware that most of these cases are decided on their facts and a variety of issues have arisen — for example, whether the buyer was given any document setting out the reservation of title clause; whether such a clause was incorporate in the contract and, more importantly, the necessity to show that the party supplied with the goods had a fiduciary duty to account to the seller for all that happens to them, that is for the proceeds of the sale of goods remaining in the hands of the parties supplied.
I should also like to mention that this whole question of reservation of title is a matter currently being considered at Council of Europe and EC level. Members will, I am sure, agree with me that it is not confined to bankruptcy law and in fact arises most often in the area of intercompany transactions.
As I mentioned, reservation or retention of title in its modern form occurs where sellers of goods insert in contracts of sale clauses whereby title to the goods and rights to trace into products made with them or into the proceeds of their sale are reserved until full payment is received. In the Romalpa case (1976) which has given its name to this type of clause the English Court of Appeal upheld its validity.
Later cases suggest that such a clause will be invalid at any rate in respect of products unless registered against the buyer under the Companies Acts if the buyer was a company or under the Bills of Sale Acts if he was an individual.
Reservation of title is a matter that cannot be treated in isolation from the whole law regarding non-possessory securities. In the area of insolvency it is a development which arose in the company law sphere: and it is there, as well as in the field of mortgages or charges of personal property, that it should be broached in the first instance. I will, however, look into the matter between now and Report Stage to see if anything further occurs.
