Subscriber login Close [x]
remember me
You are not logged in.

How to get your wine back when a customer enters administration

Published:  01 March, 2013

Wine law specialist Andrew Park on how suppliers can maximise their chances of success.

Text

In the first of a series of articles, wine law specialist Andrew Park looks at wine trade specific problems that arise when enforcing retention of title claims, and how suppliers can maximise their chances of success.

 

Any supplier of wine on credit terms must keep a very careful eye on the solvency of its customers. A Retention of Title (ROT) clause can be a very effective protection for a wine supplier if a customer becomes insolvent. In its simplest form, an ROT clause says that wine supplied on credit terms will remain the property of the supplier until it has been paid for.

 

But in the legal world, nothing is ever quite as simple as that. In a series of articles, wine law specialist Andrew Park will look at wine trade specific problems that arise when enforcing ROT in practice, and how suppliers can maximise their chances of success.

 

Not just wine - ROT can apply to any goods supplied on credit

 

Although these articles focus on wine, the legal position regarding ROT is the same for all kinds of drinks or other goods supplied on credit terms.


No clause - no chance

Unless you (a) have a well-drafted ROT clause, and (b) ensure it is incorporated as a term of the sale contract, you will have no chance whatsoever of recovering any of the wine supplied. Conditions (a) and (b) are the absolute basic, essential pre-conditions. They are easy to fulfil, but it is surprising how often neither is satisfied, or ever even considered. Unless you're certain that your contractual arrangements meet both conditions, you need a legal review of them without delay.

 

Notification of the ROT claim

 

It's essential to give both the customer and the Administrators, if they're appointed, written notice of the ROT claim. You should also consider whether it's necessary to give written notice terminating the customer's rights to possess and re-sell the wine.

 

The latter could be critical. In Bulbinder Singh Sandhu v Jet Star Retail Limited (High Court, 2010) the claimant (S) had supplied goods to a re-seller (JSR). The contract contained an ROT clause. JSR went into administration. The Administrator (A) sold the remaining stock supplied by S, which had not been paid for. S sued A for its value. He lost. It was agreed that JSR had the right to re-sell stock supplied by S. The ROT clause did not expressly terminate that right if JSR ever went into administration. S had not given notice terminating it. JSR therefore still had the right to re-sell, despite A's appointment. S could only claim in the administration as an unsecured creditor. (In most cases that's another way of saying that the supplier can expect to recover very little, and often nothing at all.)


Distribution or supply agreement


If you had an ongoing distribution or supply agreement with the customer, you should also consider whether to give notice of termination of that agreement- it might not happen automatically. I suggest you do not do this without first taking legal advice on its implications. (A future article will deal with the position where the customer collects payments from the end-customer - this can be particularly tricky and must be handled with extreme care.)

 

Next time we'll look at how to establish where ROT stock is held.

 

Andrew Park is a solicitor and director of APP Wine Law, a dedicated UK wine trade law firm, specialising in UK/EU wine agency, distribution, brand development and joint venture work. Visit to access free briefing notes and other resources on many topics relevant to those in the wine trade.

 

In the first of a series of articles, wine law specialist Andrew Park looks at wine trade specific problems that arise when enforcing retention of title claims, and how suppliers can maximise their chances of success.

Any supplier of wine on credit terms must keep a very careful eye on the solvency of its customers. A Retention of Title (ROT) clause can be a very effective protection for a wine supplier if a customer becomes insolvent. In its simplest form, an ROT clause says that wine supplied on credit terms will remain the property of the supplier until it has been paid for.

But in the legal world, nothing is ever quite as simple as that. In a series of articles, wine law specialist Andrew Park will look at wine trade specific problems that arise when enforcing ROT in practice, and how suppliers can maximise their chances of success.

Not just wine - ROT can apply to any goods supplied on credit

Although these articles focus on wine, the legal position regarding ROT is the same for all kinds of drinks or other goods supplied on credit terms.


No clause - no chance

Unless you (a) have a well-drafted ROT clause, and (b) ensure it is incorporated as a term of the sale contract, you will have no chance whatsoever of recovering any of the wine supplied. Conditions (a) and (b) are the absolute basic, essential pre-conditions. They are easy to fulfil, but it is surprising how often neither is satisfied, or ever even considered. Unless you're certain that your contractual arrangements meet both conditions, you need a legal review of them without delay.

Notification of the ROT claim

It's essential to give both the customer and the Administrators, if they're appointed, written notice of the ROT claim. You should also consider whether it's necessary to give written notice terminating the customer's rights to possess and re-sell the wine.

The latter could be critical. In Bulbinder Singh Sandhu v Jet Star Retail Limited (High Court, 2010) the claimant (S) had supplied goods to a re-seller (JSR). The contract contained an ROT clause. JSR went into administration. The Administrator (A) sold the remaining stock supplied by S, which had not been paid for. S sued A for its value. He lost. It was agreed that JSR had the right to re-sell stock supplied by S. The ROT clause did not expressly terminate that right if JSR ever went into administration. S had not given notice terminating it. JSR therefore still had the right to re-sell, despite A's appointment. S could only claim in the administration as an unsecured creditor. (In most cases that's another way of saying that the supplier can expect to recover very little, and often nothing at all.)


Distribution or supply agreement


If you had an ongoing distribution or supply agreement with the customer, you should also consider whether to give notice of termination of that agreement- it might not happen automatically. I suggest you do not do this without first taking legal advice on its implications. (A future article will deal with the position where the customer collects payments from the end-customer - this can be particularly tricky and must be handled with extreme care.)

Next time we'll look at how to establish where ROT stock is held.

Andrew Park is a solicitor and director of APP Wine Law, a dedicated UK wine trade law firm, specialising in UK/EU wine agency, distribution, brand development and joint venture work. Visit to access free briefing notes and other resources on many topics relevant to those in the wine trade.

Keywords: