BT writes: I run a small company that makes garments. Our largest customer has just gone into liquidation and holds a lot of stock for which we have not been paid. How can I get it back?
In many instances, once a company is placed into liquidation or other form of insolvency, there is little that can be done to recover the goods it has not paid for. Under English law, title of the goods passes on their delivery. The exception to this is where the supplier has retained title to the goods until it receives payment. This is done by inserting a clause into the terms of trading between the supplier and its customer, which is called a retention-of-title clause. The first thing you should look at is whether the agreement between you and your customer incorporates such a clause. Frequently such clauses are shown on invoices, order acknowledgments and account-opening- facility agreements. If you do not have such a clause, we advise you to seek legal advice to ensure that one is incorporated into your standard terms in future. If you have such a clause, the first step you should take is to contact the liquidator and arrange to inspect the goods in his possession. This is essential as your claim will be based on the quantity of stock in his hands. The next stage is to make a claim. To do this you need to provide the liquidator with documentation including copies of the original order, copies of the order acknowledgement, copies of any invoices and confirmation of delivery. You will need to demonstrate that you have a valid clause in the contract between you and your customer and that you have been able to identify the goods in question. The liquidator is unlikely to return any goods until you have satisfied him in respect of all the above. The law on reservation of title is extremely complex and if you encounter any difficulties in dealing with the liquidator, we advise you to seek independent specialist legal advice. The Law Society can provide you with a list of suitable solicitors.