Few judicial decisions can have spawned such controversy as that of the Court of Appeal in Aluminium Industrie Vaassen B.V. v. Romalpa Aluminium Ltd.1 (“Romalpa”). This decision affirmed the effectiveness of the reservation of title clause as a weapon in the hands of a supplier of goods against the competing claims of a charge-holder in an insolvency. The criticisms levelled at the decision are legion. The problems thrown up by the judgments of the Court of Appeal have been extensively discussed both judicially and academically.2 The most recent judicial pronouncements on the subject are those of Phillips, J., in E. Pfeiffer Weinkellerei-Weineinkauf G.m.b.H. & Co. v. Arbuthnot Factors Ltd.3 and Tatung (U.K.) Ltd. v. Galex Telesure Ltd.4 His judgment, in Pfeiffer in particular, illuminates many of the key issues in the area and forms the focal point of this assessment of the current state of the reservation of title clause.

In Pfeiffer, the plaintiff was a German company which carried on business as an exporter of wines. The company sold wine to an English importer on terms which included a property reservation clause. That clause lost some grammatical elegance after translation from the German. Basically, however, it provided that the goods remained the plaintiffs property until they had been paid for. In addition, the clause permitted the importer to resell the goods. The following is a verbatim transcription of further provisions in the clause with all oddities included:

All claims that [the importer] gets from the sale … with all rights including his profit amounting to his obligations towards [Pfeiffer], will be passed on to [Pfeiffer], On demand the [importer] is obliged to notify the assignment of the claim to give [Pfeiffer] in written all necessary information concerning the assertion of [Pfeiffer’s] claims … In case of cash sales, the money that has come from a third person immediately becomes [Pfeiffer’s] … this money has to be separated from other money, it must be booked correspondingly, and must be administered until called for.

As was its wont, the English importer, Springfield, sub-sold the wine on credit terms. Then Springfield entered into a factoring agreement whereby it agreed to