Court of Appeal Part Reverses High Court’s Ruling in Action For The Price of Goods

Caterpillar (NI) Ltd (formerly known as FG Wilson (Engineering) Ltd) v John Holt & Company (Liverpool) Ltd [2013]

This case is based on the decision of the Court of Appeal, which reversed in part the decision of the High Court in an action for the price of goods.

Brief Facts

  • The Claimant (Wilson) was a supplier of generators, spare parts and related products and services.
  • The Defendant (Holt) was a customer of Wilson, which provided such products to Holt for export to its Nigerian subsidiary (Holt Nigeria).
  • Terms were agreed using Wilson’s standard terms and conditions, which provided for clauses such as a “no set-off” and “retention of title”.
  • Holt failed to pay outstanding invoices despite a repayment plan having been agreed to so Wilson brought proceedings claiming US$12.6million as Holt had already resold the goods to Holt Nigeria.

“No Set-Off Clause”

Contained within Wilson’s terms dealing with prices and payment, the “no set-off” clause provided:-

“Buyer shall not apply any set-off to the price of Seller’s products without prior written agreement by the Seller.” [Emphasis added]

Retention of Title Clause

Provided within the terms as follows:-

“Notwithstanding delivery and the passing of risk in the products, title shall not pass to Buyer until Seller has received payment in full for the products and all other goods or services agreed to be sold by Seller to Buyer for which payment is then due.  Until such time as title passes, Buyer shall hold the products as Seller’s fiduciary agent and shall keep them separate from Buyer’s other goods.  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.  If the Buyer fails to comply with a demand from the Seller to return products to which title has not passed, Seller may forthwith enter any premises where the products are stored and repossess them.” [Emphasis added].

Decision of the High Court

The High Court granted summary judgment in favour of Wilson.

APPEAL

Holt appealed to the Court of Appeal, which had to consider whether, on its true construction, the “no set-off” clause prevented Holt from relying on a defence of set-off and whether the retention of title clause operated to prevent title of the goods passing from Wilson to Holt and, if the retention of title clause operated in this way, whether Wilson was able to pursue an action for the price of the goods.

Decision

The Court of Appeal agreed with the High Court that the “no set-off” clause was effective to prevent Holt from relying on a defence of set-off but disagreed that title of the goods passed to Holt under the retention of title clause under the terms.  Such a clause operated to prevent title from passing to Holt.  As title had not passed to Holt, Wilson could not maintain an action for the price of the goods outside of s49 of the Sale of Goods Act 1979.