Q: I supplied goods to a customer who has since fallen into administration without paying my invoice. However, the customer is still trading under a new business name. Do the goods I supplied to the customer still belong to me?
Aug 08 2007
Answered by: Clive Lewis Ask a question
A person can apply for an administration order if one or more of their creditors has obtained a county court judgment against them, then the county court may make an administration order. Administration is a court-based procedure where the debtor makes regular payments to the court towards the total sum they owe their creditors.
The total debts must not be more than £5,000 and the debtor will need enough regular income to make weekly or monthly repayments. Debtors do not have to pay a fee for an administration order but the court will take a small percentage towards its costs from the money the debtor pays. If the debtor does not pay regularly, the court may cancel the order and the debtor’s creditors will be able to take action against the debtor separately to get back what he or she owes them.
So if your debtor has gone into administration you should receive a payment of a proportion of the debt from the Court or its appointed official.
Administration orders are registered in the Register of County Court Judgements. This will make it difficult for the debtor to get credit. If the order has been paid in full, the debtor can ask the court to mark the entry in the register as “satisfied” and give the debtor a certificate proving they have paid. So if the debtor in administration has set up a new business they will find it difficult to get goods on credit.
You ask whether the goods you supplied to the customer still belong to you. This is only the case when your sale terms and conditions contain a “retention of title” clause.
A “retention of title” clause is a clause that allows the supplier to retain ownership over the goods supplied until such time as certain conditions are met, thus providing the supplier with a form of security against the buyer's default or insolvency. A retention of title clause is sometimes known as a Romalpa clause or as a reservation of title clause.
Under the Sale of Goods Act 1979, where there is a contract for the sale of specific goods, the supplier can retain his right to ownership of those goods even though they have been delivered to the purchaser as long as all parties to the contract agree to this provision.
For example, if it is stated in the contract, the supplier may retain the title to the goods until full payment is received. When valid, the supplier’s claim to any unused goods will be binding against any trustee or liquidator subsequently appointed. So if you did have a retention of title clause in your terms of sale, it should have been pointed out to the Court or its official at the time of the administration proceedings.
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