Lloyd's Maritime and Commercial Law Quarterly
ADMINISTRATIVE CAUTION
John de Lacy*
This article examines the effects of the Insolvency Act 1986 on the notion of retention of title.
The Cork Report made the following remarks on retention of title and its effects upon insolvency law:
We have found this a difficult and complex subject. Much of insolvency law stands at the intersection of a number of different areas of the law and reservation of title in insolvency is a remarkable instance of this. The subject is highly technical and encompasses the law relating to sale of goods, bailment, agency, trusts, mortgages and charges and the principles of tracing….
The question which arising from the powerful submissions made for the law to lend support to receivers in their efforts to continue to restructure or rehabilitate businesses, is whether or not some similar moratorium can be applied to reservation of title clauses. It would of course amount to an interference with the contractual rights taken by the supplier, but so is the statutory qualification of the forfeiture rights given to a landlord. The fundamental question is whether or not the public interest in affording, at least, an opportunity for the preservation of businesses and the maintenance of employment requires that private security rights should be overridden.
We have unhesitatingly concluded that it is a small penalty on those who have taken the benefit of reservation of title clauses for their rights to be qualified by a moratorium of up to a year.1
One of the important features concerning the development of the retention of title doctrine has been the lack of statutory regulation. Instead, its roots are firmly in the common law tradition, which is still in the process of development as new cases add a previously uncharted dimension to the equation. Despite this, there is a limited amount of statutory involvement in the shape of ss. 17 and 19 of the Sale of Goods Act 1979. However, these sections do no more than provide for the freedom of the parties to the contract of sale to determine the passing of property between themselves. The Insolvency Act 1986 slightly altered the general norm of non-interference and added a new dimension by providing for a new device in the company law area, the “administration order”.
Under Part II of the Act,2 the courts are given the power to make an administra-
* Pembroke College, Oxford.
1. Report of the Review Committee on Insolvency Law and Practice (Chairman—Sir Kenneth Cork) (1982) Cmnd. 8558 (hereafter “Cork Report”), paras. 1587, 1649. It should be noted that there is no provision for a time limit under the Administration Order Procedure established under the Insolvency Act 1986. Unless otherwise indicated, section references in this article are to the 1986 Act.
2. I.e., ss. 8–27
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