Supplier versus administrator - does the retention of title (RoT) clause work?

Isher contracted to supply clothes to Jet Star (trading as Mark One). The contract included a typical "all monies" RoT clause so that ownership of all products supplied did not pass to Jet Star until it had paid all the monies it owed to Isher.

Jet Star entered administration. Isher demanded payment in full (as it was entitled to do under the default provisions). However, Isher did not terminate the contract or ask the administrator to trace, identify or deliver up items of stock, or rely in any way on its RoT clause.

The court found that the administrator was perfectly entitled to sell the goods and, rather than having to account for the net proceeds of sale direct to Isher, the administrator was entitled to divide the proceeds between all the creditors.

The position may have been different if (before the administrator had sold the goods) Isher had sought to rely on its RoT clause and had asked the administrator to deliver up or identify the goods. Suppliers should make sure that not only is title to goods retained until payment is made in full but, on insolvency, there is an automatic trigger obliging a customer to immediately identify any remaining stock and provide possession of it
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Case: Isher Fashions UK v Jet Star Retail Limited (in administration)

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