Retention of Title

Question 1

Re Bond Worth Ltd [1980]

Answer 1

• Bond Worth = carpet maker + bought raw materials from supplier
  
  • Supplier attempts to retain the “Equitable and Beneficial interest”
    
    • *Equitable retention suggests Legal title is transferring to other person
  • Carpet maker free to deal with the materials as if absolute owner

*HELD = NO Trust, But a Floating Charge
- BW could do as they wished with them
- Despite language of the parties, this was not intended to be a trust, but rather a floating charge (don’t need to know details of FC, they just don’t attach to any particular asset unless company goes bankrupt)
- *FC was meant to be registered under company’s legislation, but wasn’t as they thought it was a trust = *Arrangement VOID

Question 1

what is a Retention of Title clause?

Answer 1

where you sell someone product on credit + to protect yourself incase buyer goes bankrupt before paying, you try to reserve some property rights in the asset (common)

Question 2

Clough v Mill v Martin [1984] –> goods used in a new product

Answer 2

• Contract for sale of yarn to be turned into fabric purported to:

1. Reserve full legal beneficial ownership for the seller until payment received in full
2. Extend this ownership to the “whole of” any fabric manufactured from the yarn

i.e. –> if buyer goes bankrupt, they can identify their assets in the Yarn OR the finished fabric

1st Point:
- First point was Allowed
- No problem in principle reserving legal beneficial ownership
- Takes effect as a bailment
- BUT what happens if 90% of price has been paid, BUT buyer then goes insolvent?
- According to contract, they’re still full beneficial owner + Entitled to take it and Sell it regardless of how most of the money was paid

In Clough, wasn’t an issue
- NO Charge created, thus Nothing Requiring Registration
- Was legitimate Retention of Title

2nd Point:
- CoA said in theory this would be fine to extend these rights over new fabric

Lord Goff: as long as just A + B (no 3rd parties involved) = was fine

BUT could lead unintended consequences

*HELD: seller did NOT hold on trust = VOID
- Due to potential conflict with competing supply contract
Could only take effect as a charge –> only valid if registered

Question 3

Midland Bank v Wyatt [1995] –> sham trusts

Answer 3

• Man set up a business + was aware of possibility of using trust to project assets from creditors
  
  • Drew up Doc, Purported trust held by him of family home for daughters
    
    • If was valid, would have been separated from his estate
• BUT: No genuine intention, Did Not tell anyone about this arrangement, everyone was unaware the Trust existed, locked away in safe –> Sham

*Court Held = He had No Intention to hold on Trust for daughters, was using it as a safeguard from creditors
- If they didn’t come would have continued to use family home as his own