The High Court
Between:-
Sugar Distributors Ltd
Plaintiff
v
Monaghan Cash and Carry Ltd (in Liquidation)
Defendant

1979 No. 5380P [18th June 1981]
Status: Reported at [1982] ILRM 399.

Carroll J
This case concerns a retention of title clause contained on the front of the plaintiffs’ invoices sent out to customers and marked ‘Conditions of Sale’.
The form of the clause is as follows:

1.	The ownership of the sugar to be delivered as per invoice shall only be transferred to the purchaser when the full amount of the purchase price has been discharged. In default of payment title shall remain with Sugar Distributors Ltd and it shall have the right to repossess the sugar without notice or other formality.

There are two other clauses also shown on the face of the invoice which are not relevant to the issues here.

The plaintiffs supplied sugar to the defendants on foot of three order forms dated respectively, 14 June 1978, 4 July 1978 and 18 July 1978, in respect of which there were three delivery dockets, dated respectively, 15 June 1978, 4 July 1978 and 18 July 1978. These were followed by three invoices numbered and dated respectively No. 2202 dated 15 June 1978, No. 4940 dated 4 July 1978 and 5980 dated 18 July 1978.

The amounts shown due on the three invoices are respectively:
£1,518.23
£1,530.92
£1,446.88
‑‑‑‑‑‑‑	‑‑‑
Total:	£4,496.03

The total amount claimed due is £4,295.74 after making due allowances

The defendants have sold nearly all the sugar to their customers. There is only a small quantity remaining unsold, amounting to about 150 lbs.

The plaintiff’s claim is for:

1.	A declaration that the plaintiffs are entitled to the sugar the subject matter of the contract specified in invoices 5980, 4940 and 2202 remaining in the possession of the defendants and an order for its delivery.

2.	A declaration that the plaintiffs are entitled to a sum of money representing the proceeds of sale of the sugar supplied to the defendants and then sold to third parties.

The defendants deny that the plaintiffs are entitled to the relief sought on three grounds:

1.	That the retention of title clause was not agreed and is therefore not binding.

2.	That the plaintiffs are not entitled to make a claim based on trustee status without this claim being made clear on the pleadings, and

3.	If there is a binding retention clause the plaintiffs cannot succeed because there is no possibility of tracing proceeds of sale.

The first issue is whether the clause shown on the face of the invoices is a binding condition.

The evidence was that the plaintiffs and the defendants first did business in 1974 when the defendants approached the plaintiffs for sugar during a sugar shortage. The condition in question was introduced about 15 months before June 1978, the first relevant date. Mr. Tully, who took up duty with the plaintiff company as secretary in 1977 could not himself say that a letter drawing the attention of customers to this clause was sent out, though he believed it had been. Mr. McAllister, managing director of the defendant company, said that his attention was not drawn to any retention of title clause, by phone or letter. He also said that in relation to invoices he was only concerned to check each one for quantity and price and that he could not carry on business if he read all the small print on the invoices. He did, however, notice a change in the form or size of the invoices. In answer to a question whether it could have made any difference if he had read it, and would he have stopped buying, Mr. McAllister said he did not think so.

Mr. Sean Murphy, manager of the defendant company, in answer to a question whether anyone had told him about the retention of title clause, said not that he could remember.

I therefore hold that the plaintiffs have failed to prove that the special attention of the defendants was drawn to the retention of title clause which was introduced by the plaintiffs approximately 2 to 2½ years after the parties had first commenced trading with each other. Therefore I must proceed on the basis that the invoices alone provided the information. The question arises whether there was a duty on the plaintiffs to draw the defendant’s attention to the clause specifically or whether the defendants ought to have known of the existence of the clause because it was on all invoices for a period of about 15 months before the relevant dates.

I have been urged by Mr. Gleeson for the defendants to hold as Barrington J, held in Western Meats Ltd v National Ice and Cold Storage Ltd and Anor [1982] ILRM 99 that the plaintiffs had not given the defendants reasonable notice of the contents of their standard conditions.

But the circumstances of that case are not similar to the present one. There was a businessman offering a specialist service (i.e. cold storage) but accepting no responsibility for it. There the business relationship was commenced by a meeting followed by a letter, in the text of which there is no mention of standard conditions. Here there is a supplier of goods, the plaintiffs, incorporating a condition of sale via its invoices which according to the cases cited has apparently become quite common. The managing director of the defendant company said he did not read it and that he never read the small print on invoices but apparently if he had read it it would not have made any difference to him. The invoice itself is a simple enough document. Three conditions appear on its face and they are not intimidating in complexity.

I consider that the defendants, having received these invoices for fifteen months, ought reasonably to have known the terms on which the goods were supplied. In my opinion the plaintiffs gave reasonable notice of the conditions applicable to these transactions by putting them on the face of the invoices and there was no special duty on the plaintiffs to draw the defendants’ attention specifically to the retention of title clause. I therefore hold that the condition was a valid and binding condition.

The next question for consideration is the legal effect of such a condition. Mr. Peart for the plaintiffs opened to me two Irish cases, the first of these in Re Stokes and McKiernan Limited High Court (McWilliam J) 1978 No. 376 Sp. 12 December 1978. McWilliam J considered four different retention of title clauses. In the ‘Oerlikon’ clause, the relevant provision was that equitable and beneficial ownership should remain.

In the ‘Thor’ clause, the relevant provision was that title of the goods sold should not pass. In the ‘AET’ clause the relevant provision was that the property in the goods should not pass. In the ‘Tecalamit’ clause, the provision was that all materials (etc.) should remain the company’s property.

In this case, the retention clause refers to ‘ownership’ only being transferred when payment made and in default title should remain.

In the second case, Frigoscandia v Continental Irish Meat Ltd and Crowley [1982] ILRM the relevant clause provides that until payment, plant etc. should remain the seller’s personal property.

Mr. Peart also cited two English cases. In Aluminium Industrie BV v Romalpa Ltd [1976] I WLR 676 the relevant clause provided that the ownership of the material etc. would only be transferred to the purchaser when, etc. In In re Bond Worth Ltd [1979] 3 All ER 919 the relevant clause provided that the equitable and beneficial ownership of the goods was to remain with the sellers until full payment.

In deciding the Stokes and McKiernan Case in favour of all four claimants under the retention of title clauses, McWilliam J adopted the views expressed in the Romalpa Case. When he came to deliver judgment in the Frigoscandia Case, he adverted to the fact that the judgment of Slade J, in the case of Bond Worth Ltd had not then been delivered and that the clause in that case was similar to one of the four contracts in the McKiernan Case, (i.e. the ‘Oerlikon’ clause). But he still held that the claimant in the Frigoscandia Case was entitled to succeed.

In the Bond Worth Case, Slade J held (at 936) that the legal title or property in the goods passed to the buyer on delivery.

In my opinion the clause in this case is not similar to the Bond Worth Case. It is similar to the one in the Romalpa Case and to three of the clauses considered in the Stokes and McKiernan Case. The entire property in the goods (i.e. ownership/title) is expressed to remain in the vendor until payment. In my opinion the retention of title clause departs from the usual debtor creditor relationship and shows an intention to create a fiduciary relationship. I adopt the views of McWilliam J in Stokes and McKiernan Ltd at p. 8 as follows:

Although there were references in the judgments to an additional clause in the condition in the Romalpa Case, which clause is not included in the conditions before me, it seems to me that the decision in that case is based on the ground that the goods remained the property of the vendor and although the purchaser was entitled to resell them in the course of his business, the purchaser was selling on behalf of the vendor to the extent to which money was still owing to the vendor in respect of the goods and that the purchaser was therefore bound to account to the vendor for his money. I accept that this is the position and that the claimants in this case are entitled to trace the purchase price of their goods in the hands of the receiver.

I do not consider it necessary to deal with the matter of tracing raised by Mr. Gleeson’s point that the plaintiffs cannot succeed because the fund or money cannot be traced. The plaintiffs seek a declaration that they are entitled to a sum of money representing the proceeds of sale of the sugar sold by the defendants. In my opinion they are entitled to this declaration on the grounds that the sugar sold was their sugar and that the defendants are liable to account in a fiduciary capacity for the proceeds. The plaintiffs are accordingly entitled to trace the proceeds of sale.

If the liquidator of the defendant company has a problem in relation to the payment of the moneys, whether because of tracing or otherwise, it is open to him to apply to the court for directions. I do not consider it is a good defence to the plaintiffs’ claim for the declarations sought, to say it cannot succeed because the money cannot be traced.

As to the other matter raised by Mr. Gleeson that the claim was not adequately pleaded, I can only say that the claim has been laid squarely on the plaintiffs rights arising under the retention of title clause which is pleaded in clause 2 of the statement of claim and again in the reply. The plaintiffs have not raised or sought to raise the question of tracing. Therefore I do not agree that the claim has not been adequately, pleaded.

Accordingly I will make an order making the declarations in the terms sought and I will also make an order for the return of the 150 lbs of sugar still held by the defendants.