The High Court

McWilliam J
No.3770P
Between
Frigoscandia (Contracting) Ltd
Plaintiffs/Respondents
and
Continental Irish Meat Ltd
and
Lawrence Crowley: 
Defendants
Status: Reported at [1982] ILRM 396

Judgment of McWilliam J. delivered on the 25th of April 1979. 

This case concerns the construction and effect of a clause which, in one form or another, is becoming increasingly common in contracts for the sale of goods. Here, the goods consist of refrigerating equipment for a factory producing meat products of a hamburger or similar nature and is described as a Gyrofreeze In-Line Freezing Model 118-405. I shall call it the machine. It was sold by the plaintiff to the defendant, Continental Irish Meat Ltd, at the price of £39,800 payable on the following terms, that is to say: 30% with the order, 40% on commencement of site work, or when the equipment is ready for shipment or (sic) if the site work is delayed for any reason beyond our control, 20% when equipment is mechanically ready for operation, but not more than 30 days after the second payment, and 10% when the equipment has been handed over, but not later than 30 days after the third payment. Payment nett fourteen days from receipt of invoice. There was also a provision for a variation in the price in accordance with any changes in exchange rates.

The machine was sold by the plaintiff subject to conditions which included the following: (1) Until all sums due to the seller have been fully paid to it, the plant, machinery and materials supplied by the seller herein shall remain the seller’s personal property and retain its character as such no matter in what manner affixed or attached to any structure. (2) If the buyer fails fully to perform this contract, the unpaid portion of the purchase price shall, at the option of the seller, become immediately due and payable without notice, together with all reasonable legal or collection agency fees incurred in the collection thereof. (3) In the case of default, the seller reserves the right to enter upon the premises where the materials are located and take possession of and remove the same, if so elects. In the event of such removal the seller may retain all payments made therefor as compensation for the use of the materials.

Essentially, there is no dispute about the facts. The machine was supplied and installed and put into operation but only a comparatively small quantity of samples had been produced before the bank appointed the second-named defendant as receiver of the property of the first-named defendant. At this time there was, and there still is, a sum of £10,199.71 due to the plaintiff in respect of the contract.

On behalf of the plaintiff it is claimed that the machine is still the property of the plaintiff and a claim is made for its return, but I understand that the plaintiff, in. fact, agreed to a sale of the factory with the machine without prejudice to its claim and will be agreeable to accept the money still outstanding in satisfaction of its claim.

On behalf of the defendants it is argued that the property in the goods passed either on delivery or once user commenced, that the terms of the contract were only effective to create a charge on the machine or some other form of security for the purchase price, that this was not registered in accordance with the provisions of s.99 of the Companies Act, 1963, and is, therefore, void as against the receiver and the creditors of Continental Irish Meat Ltd.

I had occasion to consider the effect of a number of these clauses last December in a case of Stokes v McKiernan Ltd. I was then referred to the case Aluminium Industrie Vaassen BV v Romalpa Aluminium Ltd [1976] I WLR 676; [1976] 2 All ER 552 held, adopting the view expressed in that case, that a clause such as condition (I) in the present case was effective to retain the property in the goods in the vendor even though the goods were in the possession of the purchaser. Unfortunately, the very full judgment of Slade J, in the case of Bond Worth Ltd had not then been delivered and I did not advert to the considerations which influenced Slade J, in coming to the conclusion that the clause in the contract he was construing (which was similar to the clause in one of the four contract in the McKiernan Case) created equitable charges only on the property sold and was not effective to retain the property in the goods in the vendor.

As pointed out by Slade J, the clauses in the Bond Worth Case and the Romalpa Case were very different. The clause in the Bond Worth case was as follows:

The risk in the goods passes to the buyer upon delivery, but equitable and beneficial ownership shall remain with us until full payment has been received (each order being considered as a whole) or until prior resale, in which case our beneficial entitlement shall attach to the proceeds of resale or to the claim for such proceeds

The clause in the Romalpa Case was similar to that in the present case in that the entire property in the goods was expressed, although in a different form, to be retained by the vendor until all that was owing had been paid. The clause was as follows:-

‘The ownership of the material to be delivered by AIV will only be transferred to purchaser when he has met all that is owing to AIV, no matter on what grounds.’

A difficulty which arises with regard to clauses of this nature is that they are included in the contracts to secure the payment to the vendor of the price of the goods and therefore it may be said as has been argued that the goods once delivered, are intended to be held by the purchaser as security for such payment and that the transaction is in the category of a mortgage in that the vendor, although retaining ownership or an interest in the goods, cannot take possession of them provided that the specified instalments are paid, and that this leads to the conclusion that such a clause must be treated as creating a mortgage or a charge over the goods.

In my opinion such a conclusion can have no general application to these clauses and each case must depend on its own facts. The parties to a contract can agree to any terms they wish and, amongst others, they can agree that the property in the goods shall not pass to the purchaser until all the instalments of the purchase price have been paid. See McEntire v Crossley Brothers (1895) AC 457 at 463; and s.17 of the Sale of Goods Act, 1893. The court has to decide what was the intention of the parties as shown by the provisions of the whole agreement. Where expressions such as ‘equitable and beneficial ownership remaining with the vendor’ are used or the nature or circumstances of the transaction make it unlikely that there could have been an intention that the property in the goods should not pass immediately to the purchaser, the ascertainment of the intention of the parties may present difficulty and require an earnest consideration of all the facts of the case. In the present case no such difficulty arises. The clause itself is clear, there was only one article sold, this article was intended to be kept in the factory of the purchaser and it was of such a nature that its re-sale could not have been reasonably contemplated by the parties.

Accordingly, I am of opinion that the plaintiff is entitled to succeed in its claim.