Bulbinder Singh Sandhu (trading as Isher Fashions UK) v Jet Star Retail Ltd T/A Mark One ((in Administration) and Others
| Jurisdiction | England & Wales |
| Judge | His Honour Judge Simon Brown,Specialist Mercantile Judge,s.9 Senior Court Act. |
| Judgment Date | 21 April 2010 |
| Neutral Citation | [2010] EWHC B17 (Mercantile) |
| Docket Number | 9BM40023 |
| Court | Mercantile Court |
| Date | 21 April 2010 |
[2010] EWHC B17 (Mercantile)
IN THE HIGH COURT OF JUSTICE
QUEENS BENCH DIVISION
BIRMINGHAM DISTRICT REGISTRY
MERCANTILE COURT
His Honour Judge Simon Brown QC
Specialist Mercantile Judge
s.9 Senior Court Act.
9BM40023
Counsel for the Claimant: Edward Pepperall instructed by Freeth Cartwright of Leicester
Counsel for the Defendants: Adam Goodison instructed by Sprecher Grier Halberstam LLP of London
JUDGMENT ON OUTSTANDING PRELIMINARY ISSUE
Issue
In the interests of furthering the Overriding Objective, on 5 th June 2009 the Court ordered that 3 key determinative issues concerning a Retention of Title clause ["ROT"] in a contract between the Claimant and the First Defendant be tried as preliminary issues.
On 22 nd January 2010, judgment was given in favour of the Claimant on the first two issues. Accordingly, the ROT clause was found to be validly incorporated in Clause 6.2 of the Contract dated 9 th June 2008.
The remaining issue is:
"Whether the Claimant has any claim as pleaded in the Particulars of Claim in respect of any goods:
(i) held in stock by the First Defendant upon it entering into administration on 19 th November 2008 but sold before the sale of the business to Internacionale Retail Limited on 25 th November 2008; or
(ii) held in stock by the First Defendant at the time of the administration and delivered to Internacionale Retail Limited pursuant to the 25 th November 2008 agreement."
Parties
The Claimant has been the 100% shareholder in the First Defendant Company, Jet Star Retail Ltd, since 30 th October 2008. However, he is not an official Director of the Company.
The Defendants are Jet Star Retail Ltd and its Joint Administrators since 20.40 hrs on Wednesday 19 th November 2008.
Isher Fashions UK was the supplier of budget fashion garments to a high street retailing chain called "Mark One" originally owned by Northworld Ltd until its administrators sold its assets to Jet Star on 27 th May 2008.
Agreed Facts
Counsel for the parties have very helpfully, and in an exemplary way of achieving the Overriding Objective, distilled the essential non controversial facts required for determination of this final preliminary issue without the need to call oral evidence (as originally envisaged). I set the relevant ones out below in their agreed tabular form with footnote references to trial bundles of documents.
th May 08 The Company was incorporated to acquire assets of the Mark One chain from the administrators of Northworld Ltd.1
th May 08 Completion of purchase by the Company of the Mark One chain from Northworld Ltd (for £7.1m, to be paid by £1.5m on completion, and deferred consideration of £5.7m payable on 13th September 2008). At the time of completion the Company was owned by Mark Brafman and Bali Singh (50% shareholders each).2
th June 08 Isher and Jet Star contract and conditions of sale of stock.3
th Oct 08 Winding Up Petition presented against the Company by Jogo Associates Ltd (with a hearing date scheduled for 22nd Dec 08).4
th Oct 08 Bali Singh (the Claimant) became 100% shareholder of the Company (buying Mark Brafman's 50% share). With no director in place, Bali Singh appoints a Mr Bastock as sole director.5
th Nov 08 Northworld Ltd made demand (by its Administrators) against the Company for payment of £3.027m.6
th Nov 08 The Stock report of the Company recorded that it held 208,258 Isher items costing £811,822" valued at "£2,376,760 with a Creditor Balance of £580,841.36". Branches held £559,849 worth but the warehouse held £252,032.720.40pm: Administrators were appointed over Jet Star Retail Limited. Neil Bennett and Michael Healy appointed Joint Administrators (by QFC holder Northworld Ltd).8
The Joint Administrators found that the electronic stock and sales records management system had failed rendering the tracing and identifying of stock impossible..
th–24th Nov 08 Stock with realisations aggregating £162,064 was sold by the Company per the Administrators.9
th Nov 08 Sale by the Administrators of the Company's leasehold properties and stock to Internacionale10 in consideration £ 1m11 with the stock element being sold for £750,000.12 Excluded assets (subject to ROT claims) were delivered up to Internacionale.
th Nov 08 Joint Administrators received a letter from Freeth Cartwright on behalf of the Claimant alleging a ROT claim under 6.2 of the Contract of 9th June 2008.13 This was the first time they were aware of the Contract or any ROT claim by Isher.
th Dec 08 Joint Administrators (by its solicitors Sprecher Grier Halberstam LLP)) respond to Freeth Cartwright 28th Nov 08 letter.14
Jun 09 Disclosure by joint administrators of sale agreement to Internacionale. Mr Singh maintains this was the first time he was aware that goods subject to ROT claims had not been sold. 15
Contentions
I am most grateful to both Counsel for their helpful learned & succinct arguments about the law on ROT's, administrations and its applicability to the Contract and given facts in this case.
Both Counsel agreed that the answer to the question posed by the remaining Preliminary Issue lay in the interpretation of the governing Contract.
Mr Pepperall for the Claimant submitted that the court should focus on the agreed ROT clause 6.2:
… "Isher Fashions shall retain property, title and ownership of the Products until it has received payment in full in cash or cleared funds of all sums due and/or owing for all Products supplied to the Customer by Isher Fashions under this Contract and any other agreement between Isher Fashions and the Customer."
He further submitted that this was an "all accounts" clause. Accordingly, by the ROT clause, title in garments supplied did not pass until the outstanding balance on the account had been cleared, and it palpably had not. Accordingly, the Administrators were guilty of conversion when they sold the stock between 20 th—25 th November 2008.
However, he recognized that he had an inherent difficulty in this contention; the Company did have the right to sell and pass on title in the stock to its own retail customers. He therefore argued that in order to give it "business efficacy" it was "necessary" as per The Moorcock Test to imply a term into the written contract containing the Claimant's own Standard Terms & Condition that "Jetstar Retail Limited was entitled to resell goods in the ordinary course of business while the company was solvent".
He submitted that the reason why it was necessary to imply such a term was that the commercial purpose of the ROT was to protect the supplier's position in insolvency since unsecured creditors "receive a raw deal"17 and "the situation changes post-insolvency" as he put it. Therefore, he submitted that the provisions of the Insolvency Act and the law of conversion should be followed ignoring the provisions in the contract under Clause 7 relating to Default which merely gave the Claimant additional rights to those in insolvency and...
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