Rolls Razor Ltd v Cox

This case, as the Judge said, arises out of the decline and fall of the Bloom Empire. Rolls Razor Ltd. was one of Bloom's Companies. It sold washing machines and other domestic appliances. Its method of business was to appoint salesmen to go round to people's houses. It supplied each salesman with a stock of the Company's machines: or, if he had no room to stock them, he would get machines out of a pool. It supplied each salesman with a van. (The Company had got these vans on hire purchase). Each slesman loaded up the van with the machines. He called on people in thier houses and induced them, if he could, to buy the machines, either for cas or on hire purchase temrs. Every week the salesman had to pay over to the Company all the cash which he had received. he was not allowed to deduct his commission from the cash. The Company paid him each week the commission which he had earned in the preceding week: but they deducted a percentages of 2s. or 1s. in the pound so as to form a "retention fund". This was to be available in case of the salesman defaulting on cash or mchines. It was repayable to the salesman only after the determination of the agreement. The salesmen were not servants of the Company, but independent contracts. They paid National Insurance contributions on the footing that they were "self-employed" persons. The terms of appointment were contained in a printed agreement, which is too long for me to record in full but I will refer to relevant portions when necessary.

In the middle of July 1964 ominous rumblings were heard. Big cracks appeared in the Bloom edifice. The salesmen were anxious about thier commission which the Company had retained in the "retention fund". They tried to save it from being lost. Some of them held on to cash in their hands or stock still unsold. The question is whether they have any right to do so. The cse of Mr Cox has been taken as a test case. he had been engaged in the work for two or three years, and although he had been given notice of termination in May 1964, that had been waived and hehad continued in the engagement right up to the events herein-after mentioned.

On 16th July, 1964, the board of directors of Rolls Razor were advised that the Company was insolvent. On the 17th July, 1964, they resolved that the Company and its subsidiaries be voluntarily wound up. They issued a statement to the Press. The banks refused to honour the Compny's cheques. everyone knew that the Company was "on the rocks". The position of Mr Cox on that day was as follows:

In addition he held in his possession a table-top for sales at a price of £ 3. 3s. Od. He also had seven tap-adpaters (not for sale) which he use when fitting the machines.

After the 17th July, 1964, Mr Cox, like the other salesman, claimed a lien on the cash nd goods in his hands. The board of directors did not insist on his handing them over. In the last days of July, 1964, they sent a circular to all the salesman in these terms:-

"the Bord has given anxious consideration to the position of the sales representative.

In the present circumstances it is the directors' duty to collect nd safeguard the assets of the Company pending its liquidation. Accordingly, whilst the board is not in a position to admit the validity of any lien which sales representatives may claim over goods and/or cash now in their hands, but must reserve all the Company's legal rights, the board intends to take no immediate steps to claim payment to the Company of any moneys belonging to the Company hold by sales representatives up to, but not exceeding, the amount claimed to be due to sales representatives in respect of retention moneys and commission already earned, provided that all vehicles, machines, equipment andcash in excess of the above-mentioned amount and unpaid cheques in respect of commission are delivered with all possible speed" to the Company. "Sales representatives are particularly warned not to dispose of any property of the Company in their hands".

Mr Cox acted on that circulr. He sent in his account to the Company showing what was due to him.

On the 30th July, 1964, pursuant to Section 293 of the Companies Act, the Company gave notice of a meeting of creditors for the 27th August, 1964. On the 27th August, 1964, extra-ordinary general meeting was held at which an extraordinary resolution was passed that the Company be wound up voluntarily. No notice of termination was given to Mr Cox, but no doubt ll parties treated the agreement as determined from that time.

The liquidator now claims that Mr Cox must pay over to him the £106. 1s. Od. in full and also hand over the table-top nd tap adapters which he has in his possession: and that Mr Cox cannot set off the £245. 19s. 11d. which the Company owes to him. The liquidator says that Mr Cox must prove in the liquidation for the £245. 19s. 11d. That would produce very little. The dividend may not be as much as 6d. in the pound.

1. LIEN

The first point is whether the slesman has any lien on the money or goods in his hnds. It was argued that the salesman was a factor at common law and a ssuch entitled to a general lien in respect of all lawful claims against his principal. Now I am quite clear that these salesmen were not factors. The usual characteristics of a factor are these: He is an agent entrusted with the possession of goods of several principals, or sometimes only one principal, for the purpose of sle in his own name without disclosing the name of this principal, and he is remunerated by a commission, see Baring v. Corrie (1818) 2 Brnewall & Alderson, p. 137 at p. 143 by Chief Justice Abbott: Stevens v. Biller (1883) 25 Chncery Division at p. 37 by Lord Justice Cotton. These slesmen lacked one of these characteristics. They did not sell in their own names, but in the name and on behalf of their.principals, Rolls Razor Ltd. They were agents pure and simple, and not factors. Even if they were factors, however, there is a written agreement which is inconsistent with any lien. It expressly provides that, on the determination of the agreement, "the agent shall forthwith deliver to the Company all the goods …. and shall account for the value of any goods not so returned".

2. SET-OFF

The second point is whether there were mutual dealings such as to give the salesman a right of set-off. In this winding-up the law of bnkruptcy applies, see Section 317 of the Companies Act, 1948. So we have to apply Section 31 of the Bankruptcy Act, 1914, which says:

"Where there have been mutual credits, mutual dobts or other mutual dealings, between a debtor against whom a receiving order shll be made under this Act and any other person proving or claiming to prove & debt under the receiving order, an account shall be taken of what is ude from one party to the other in respect of such mutual delings, and the sum due from the one party shall be set off against any sum due from the other party, and the balance of the account, and no more, shall be claimed or paid either side respectively…."

In this case the money claims on each side seem to me to come clearly within the section. On the one hand, the salesman owed the Company £106. 1s. Od., the proceeds of goods sold on their behalf. On the other hand, the Company owed the salesman £245. 19s. 11d. for commission, being as to £57. 15s. Od. for commission now due, and as to £188. 4s. 11d. for commission retained in the "retention fund". The "retention fund" was not payable at once. It was payable after the determination of the agreement - one-third after three months; one-third after six months; and the remaining third after nine months. But this furture payment makes no difference. It is well settled that debts due in the future can be set-off against debts due at the present time, see Young v. Bank of Bengal (1831) 1 Moore at p. 164-5 by Lord Brougham: Re-Daintrey, 1900, 1 Queen's bench, p. 546.

Mr Muir Hunter argued that the slesman received the moneys for a specific purpose, namely, to pay over to the Company: and that moneys so received could not be set-off. Icannot accept this contention. When moneys are recived for the very purpose of being handed over to the other party, they are properly the subject of set-off under the statute, so long as the dealings are mutual. Such was the case in Naoroli v. Chartered Bank of India, (1868) Law Reports, 3 Common Pleas, p. 444. It is only when the dealings are not mutual that there is no set-off, as in Mid-Kent Fruit Factory, 1896, 1 Chancery, p. 567: City Equitable Fire Insurance Co. Ltd.1930, 2 Chancery, p. 293. Here the dealings were clearly mutual.

Mr Muir Hunter also argued that the agreement expressly provided that there was to be no set-off. the agent was...