The High Court has ruled that a retention of title clause in a drinks supply contract between Comans Wholesale and J. Donohue Beverages Limited created a charge, not a trust, and that the charge required registration under the Companies Act 2014.
The judgment, delivered by Ms Justice Murphy on 8 October 2019, resolves a preliminary issue in proceedings over €334,362.58 in proceeds from goods resold by J. Donohue Beverages between 1 July and 13 November 2015. The company was in receivership. The court held the charge was void for non-registration against the company’s receivers and creditors.
Comans had supplied drinks and related goods under conditions allowing the buyer to resell them in the ordinary course of business. Clause 9.4 required the buyer to hold a sum equal to the price of the goods on trust for Comans and keep it in a separate account. No such account was ever set up. The receivers returned unsold, unpaid goods worth €51,910.85 to Comans. The dispute concerns the separate sum claimed for goods that had been resold and not paid for.
Comans argued that the clause created a trust over the resale proceeds and gave it a right to trace them. Alternatively, it argued that if the clause created a charge, it fell within exceptions to registration under sections 408 and 409 of the 2014 Act. The receivers argued that it was a charge and was void because it had not been registered. The bank also claimed an interest in the proceeds, relying on charges over the company’s assets and its acquisition of the company’s debts.
The judge concluded that, in substance, the clause provided security for payment in an ongoing commercial relationship between buyer and seller. Following the approach in earlier decisions, including Carroll Group Distributors Ltd v G&JF Bourke Ltd and Unitherm Heating Systems Ltd v Kieran Wallace, the court found that the arrangement created a charge rather than a trust.
The court also rejected Comans’ alternative argument that the charge was exempt from registration. The proceeds were future sale proceeds, which might not yet be cash or money credited to an account. The court noted that no separate account had been created. It said an account holding the proceeds might have brought the arrangement within an exception, but none was put in place.
The ruling decides only the preliminary issue: the nature of the clause and whether registration was required. The judgment does not determine the remaining claims for payment, declarations, accounts, damages, restitution or other relief in the plenary proceedings.