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	England and Wales Court of Appeal (Civil Division) Decisions
You are here: BAILII >> Databases >> England and Wales Court of Appeal (Civil Division) Decisions >> Caterpillar (NI) Ltd v John Holt & Company (Liverpool) Ltd [2013] EWCA Civ 1232 (17 October 2013) URL: http://www.bailii.org/ew/cases/EWCA/Civ/2013/1232.html Cite as: [2014] 1 WLR 2365, [2014] BPIR 1104, [2013] 2 CLC 501, [2014] 1 Lloyd's Rep 180, [2014] 1 All ER 785, [2014] WLR 2365, [2014] BLR 103, [2014] 1 All ER (Comm) 393, [2013] EWCA Civ 1232, [2013] WLR(D) 388

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IN THE COURT OF APPEAL (CIVIL DIVISION)
ON APPEAL FROM THE HIGH COURT
QUEEN'S BENCH DIVISION
COMMERCIAL COURT
THE HONOURABLE MR JUSTICE POPPLEWELL
[2012] EWHC 2477 (Comm)

		Royal Courts of Justice Strand, London, WC2A 2LL
		17th October 2013

Lord Justice Longmore:

1. This is an appeal by the defendant ("Holt Liverpool") from a decision of Popplewell J in the Commercial Court granting summary judgment to the claimant ("FG Wilson") for sums due pursuant to a distributorship agreement ("the distributorship agreement") and rejecting Holt Liverpool's reliance on a cross-claim, as a result of the existence of a "no set-off clause" in the contract, which prevented Holt Liverpool as buyer from applying any set off to any claim for the price of the goods subject to the distributorship agreement.
2. FG Wilson is a Northern Irish company carrying on business as a manufacturer and seller of generator sets and spare parts worldwide, together with associated services. It is a wholly owned subsidiary of an American company, Caterpillar Inc. Holt Liverpool is an English company, whose business consists predominantly of purchasing generators and spare parts from FG Wilson for export to Nigeria. The sales in Nigeria are made by Holt Liverpool's majority owned subsidiary, John Holt plc ("Holt Nigeria"), a company incorporated in Nigeria.
3. The claim was for approximately US$ 12 million as the sum allegedly due in respect of generators and spare parts supplied by FG Wilson to Holt Liverpool, together with associated services and licences. There was also a claim for contractual interest for late payment of invoices.
4. In a separate Commercial Court action, Holt Liverpool claims in excess of US$ 53 million from FG Wilson as damages for alleged breaches of the distributorship agreement relating to the import of generators into Nigeria. The essence of the claim in those proceedings ("the Holt 1 Claim") is that by supplying generators to others within Nigeria over a period going back a number of years, FG Wilson was in breach of exclusivity obligations owed to Holt.
5. The generators supplied by FG Wilson to Holt Liverpool which form the subject matter of the claim were in one or other of two forms. Some were fully assembled generators which were delivered at FG Wilson's factory in Larne, Northern Ireland, as finished products, requiring only commissioning after transport to Nigeria. These were known as "Completely Built Up" generators and referred to as "CBUs". Other generators were sold in unassembled kit form, again delivered at FG Wilson's factory in Larne, which were then to be assembled by Holt Nigeria after arrival in Nigeria. These were known as "Completely Knocked Down" generators and referred to as "CKDs". As well as complete generators, Holt Liverpool purchased spare parts from FG Wilson, because it was part of Holt Nigeria's business to service and repair generators for their customers. In relation to the CKDs, FG Wilson provided and charged for training services to enable Holt Nigeria personnel to be able to assemble the kits, and granted software licences for electronic tools used for servicing the generators.
6. Although the sales by FG Wilson to Holt Liverpool were on terms "ex works Larne", on some occasions FG Wilson made arrangements for the haulage from the factory to the port of shipment. On such occasions, FG Wilson paid the freight for the road transport and recharged Holt Liverpool. Nothing now turns on the quantum of the claim.

The nature of the dispute

7. The trading terms agreed between FG Wilson and Holt Liverpool allowed Holt Liverpool extended credit. The originally agreed payment terms were that the invoiced sums were to be paid on the 25^th day of the fourth month after the month in which the invoice was dated. This was later said to have been extended to the 25^th day of the fifth month after invoice or some subsequent date. On any view these terms were more generous than the 30 day term contained in FG Wilson's standard terms as set out below.
8. On 7th December 2009 FG Wilson emailed Holt Liverpool to say that invoices totalling about US$ 1.3m were overdue for payment. These were invoices issued in June 2009 which would have fallen due for payment on 25^th November 2009 in accordance with terms for payment on the 25^th day of the fifth month after invoicing. The email asked for confirmation that payment had been organised, or for a reason for non-payment. The response from Holt Liverpool was that the consistent practice had been to settle the account on 180-day net monthly account terms, with agreement to pay interest on the excess period beyond the standard terms of the 25^th day of the fourth month after invoice. The invoices were therefore said to be intended to be paid as part of a December settlement.
9. What subsequently happened was that invoices which were due in January 2010, on any view of the relevant credit terms, were not paid. Accordingly, on 1^st February 2010, following a meeting of FG Wilson's Credit Committee, FG Wilson notified Holt Liverpool by email that the latter's account had been placed on hold. This meant that no further orders would be accepted, and existing orders would not be shipped. The email asked for a repayment schedule by return, in order to bring the account back within the agreed trading terms.
10. There followed exchanges and discussions between the parties as a result of which trading was resumed at about the end of April or early May, on the basis of a repayment plan which would have brought Holt Liverpool back "into terms" in relation to outstanding and subsequent orders by December 2010. It is Holt Liverpool's contention that these discussions resulted in a binding agreement, which it refers to as the "Repayment Agreement", under which FG Wilson was bound to supply identified minimum quantities of product month by month.
11. By August 2010, however, Holt Liverpool was unable to meet these repayment terms. There followed subsequent negotiations for a further repayment plan, which ultimately foundered.
12. On 19^th January 2011 FG Wilson sent an email purporting to exercise its rights under a retention of title clause in its standard terms and conditions. Holt Liverpool responded by email on the following day to the effect that all the goods had been delivered to Holt Nigeria, which had become the legal owner of the goods and paid Nigerian VAT.
13. On 11^th March 2011 solicitors for FG Wilson wrote a letter before action in relation to the debt, amounting to US$ 12,628,428.73, and threatening proceedings if it was not paid within 7 days. A response from DLA Piper, solicitors acting for Holt Liverpool, was sent on 18^th March 2011. It stated that, prior to receipt of the 11^th March letter, DLA Piper had been instructed in relation to various issues arising out of the trading relationship. The letter of 18^th March set out at some length Holt Liverpool's complaints which form the subject matter of the dispute in the Holt 1 Claim. Having done so, the letter continued under the heading "Your letter of 11^th March 2011", stating:-

"Our client accepts that monies are owed to FGW but until it has been able to review all of the individual invoices claimed shown in the schedule attached to your letter, no admissions are made as to whether the sum of $12,628,428.73 is accurate."

The Issues

14. FG Wilson submits that the invoices, pursuant to which it claims, fall to be paid as the contractually agreed price for goods and (in minor respects) services. Holt Liverpool submits as follows:-

i) It has an arguable defence by way of set-off of:

a) the Holt 1 Claim; and/or

b) a claim for damages for breach of the Repayment Agreement.

ii) The no set-off clause does not prevent reliance on either of these defences because:-

a) upon its true construction it does not apply to transactional set-offs of the type comprised by the Holt 1 Claim or Repayment Agreement claim; and

b) it applies only in relation to claims for the price, and FG Wilson has no claim for the price under section 49 of the Sale of Goods Act 1979 ("the 1979 Act") or otherwise; FG Wilson might have a claim for damages for non-payment of the price, but that is not the claim advanced in these proceedings and would not trigger the application of the no set-off clause.

15. FG Wilson relies upon the no set-off clause. It accepts that the Holt 1 Claim is to be treated for the purposes of the present application as arguable; and that, if valid, it would afford a defence to FG Wilson's claim in these proceedings, by way of set-off, unless the no set-off clause were effective to preclude it from having that effect. FG Wilson disputes the existence of the "Repayment Agreement" or any claim thereunder. It also disputes the arguments advanced by Holt Liverpool for the ineffectiveness of the no-set-off clause. It accepts that the clause only applies to a claim for the price, but asserts that the claim as advanced in these proceedings is only framed as a claim for the price, contending that it has a valid claim for the price either under section 49 of the Sale of Goods Act 1979 or alternatively irrespective of that Act.
16. The judge dealt with numerous issues which no longer arise. Those that remain can conveniently be addressed in the following order:-

i) Does FG Wilson have a claim for the price? ("The Action for the Price Issue");

ii) Does the no set-off clause apply so as to prevent Holt Liverpool from relying on the Holt 1 Claim and/or the Repayment Agreement claim as a matter of construction? ("The Construction Issue"); and

iii) Can a claim for the price only be brought pursuant to section 49 of the 1979 Act? ("the Statutory Issue").

The trading relationship

17. The parties had been trading with each other since 1998. By the distributorship agreement between FG Wilson and Holt Liverpool's parent company, John Holt Group Ltd, dated 16 July 1998, John Holt Group Ltd, and its subsidiaries from time to time, including Holt Nigeria, were appointed as exclusive distributors of FG Wilson's branded products in Nigeria. Clause 5.5 provided:-

"Subject to availability the supply to the Distributor in the Territory [of] the Products in accordance with orders received from the Distributor shall be:

5.5.1 at prices notified to the Distributor by [FG Wilson]

………..

5.5.3 in accordance with the usual business terms of [FG Wilson] from time to time in force."

18. The Distributorship Agreement was an annual agreement terminable thereafter "on 180 days notice on either side". It was governed by English law. It contained terms which expressly reserved to FG Wilson the entitlement to decline to accept any order from the Holt companies.
19. Following a management buyout and company reorganisation, the Distributorship Agreement was novated to Holt Liverpool by a Novation Agreement dated 27^th February 2001.

The Terms and Conditions

20. During the relevant period there were two versions of FG Wilson's standard terms and conditions, which are not materially different ("the Terms and Conditions"). They provided in material part as follows:-

"FG WILSON BRAND GENERATOR SETS"

PARTS AND SERVICE

Terms and Conditions of Sale

In these terms and conditions "Seller" means FG Wilson (Engineering) Ltd., a Northern Ireland corporation located in the United Kingdom with principal offices in Larne, Northern Ireland ("Seller") and "Buyer" means the person, firm or company who buys or agrees to buy goods from the Seller.

AGREEMENT OF SALE: Acceptance of any order of Buyer is conditional on Buyer's acceptance of the terms and conditions contained herein, on any pages attached hereto, and in the Seller's quotation or in the Seller's acknowledgement of Buyer's order, if any…

PRODUCTS COVERED BY AGREEMENT: This Agreement concerns the purchase and sale of the parts, products and/or services shown in Sellers acknowledgement of order.

PRICES AND PAYMENTS: Prices shall be Seller's list price for the goods less any discount as notified in writing by Seller, plus Seller's charges for Delivery, insurance, consular fees, banking charges, etc., all as in effect on the date of shipment of the goods and any costs resulting from Buyer-caused delays. Seller may invoice Buyer on or at any time after delivery for any amounts still due (see Delivery) and Buyer shall pay within thirty (30) days of the date of invoice. Buyer shall not apply any set-off to the price of Seller's products without prior written agreement by the Seller. Buyer shall pay to Seller, on demand, a late payment charge equal to the lesser of Seller's then-current standard late payment charge (Prime Interest Rate + 3%/annum plus expenses) or the highest charge allowed by law on any amount unpaid on the due date.

…

TITLE AND RISK OF LOSS: Unless Seller specifically agrees otherwise in writing, delivery of products sold by Seller shall be Ex-Works (EXW), Seller's designated facility and risk of loss and damage to such products shall pass to Buyer at such EXW place, … All delivery terms referred to are INCOTERMS 2000. … Notwithstanding delivery and the passing of risk in the products, title shall not pass to Buyer until Seller has received payment in full for the products and all other goods or services agreed to be sold by Seller to Buyer for which payment is then due. Until such time as title passes, Buyer shall hold the products as Seller's fiduciary agent and shall keep them separate from Buyer's other goods. Prior to title passing Buyer shall be entitled to resell or use the products in the ordinary course of business and shall account to the Seller for the proceeds of sale. If the Buyer fails to comply with a demand from the Seller to return products to which title has not passed, Seller may forthwith enter any premises where the products are stored and repossess them.

…

GOVERNING LAW: These terms and conditions shall be governed by and construed under the laws of Northern Ireland under the jurisdiction of the United Kingdom. No remedy herein provided shall be deemed exclusive of any other remedy allowed by law or equity.

…

RELATIONSHIP OF THE PARTIES: Nothing herein contained shall be deemed to create an agency, joint venture, partnership or fiduciary relationship between the parties hereto …"

The Action for the Price Issue

21. Section 49 of the 1979 Act provides:-

"49. Action for Price

(1) Where, under a contract of sale, the property in the goods has passed to the buyer and he wrongfully neglects or refuses to pay for the goods according to the terms of the contract, the seller may maintain an action against him for the price of the goods.

(2) Where, under a contract of sale, the price is payable on a day certain irrespective of delivery and the buyer wrongfully neglects or refuses to pay such price, the seller may maintain an action for the price, although the property in the goods has not passed and the goods have not been appropriated to the contract.

(3) …"

22. The judge decided that property in the goods passed to Holt Liverpool at the time of (or momentarily before) the re-sale of the generators and parts took place to Holt Nigeria. Mr Cogley QC, on behalf of Holt Liverpool, says that property never passed to Holt Liverpool because, pursuant to the retention of title provision, Holt Liverpool were acting as agents for FG Wilson when they re-sold to Holt Nigeria. Mr Charles Hollander QC for FG Wilson denies that Holt Liverpool were acting as agents on re-sale and, by respondent's notice, says that s.49 is permissive not exclusive and does not preclude an action for the price when the buyer has failed to pay the price due under a contract of sale, even if property in the goods has not passed to the buyer.
23. In order to succeed on this part of the case Mr Hollander has to show that property in the goods invoiced "passed to the buyer" (he no longer relies on s.49(2) of the 1979 Act). If, as he submits, Holt Liverpool sold as principal to its sub-buyer it will have acquired property in the goods and passed it to the sub-buyer; if, however, as Mr Cogley submits, Holt Liverpool were only acting as agents of FG Wilson in dealing with its sub-buyer, property will not have "passed to the buyer" and s.49 of the 1979 Act will be inapplicable.
24. In the light of the clause in the contract entitled "Relationship of the Parties" which states that nothing in the contract shall be deemed to create an agency, Mr Cogley's submission is inherently counter-intuitive. But he submits that it is a necessary consequence of the "Title and Risk of Loss" clause the relevant part of which provides:-

"Until such time as title passes [which is said to be only on payment in full for all goods and services supplied] Buyer shall hold the products as Seller's fiduciary agent and shall keep them separate from Buyer's other goods."

But as the judge said in relation to this clause (para 59):-

"It does not state that the buyer is to sell as agent. On the contrary, it provides that the buyer is entitled to resell the products in the ordinary course of business … The retention of title clause provides that whilst the buyer retains the products it is to hold them as fiduciary agent: by contrast it does not state that that is the capacity in which the buyer resells the goods."

25. I agree with the judge as a matter of construction of the "Title and Risk of Loss" clause. The judge declined to be beguiled into considering the numerous authorities that exist on retention of title clauses, no doubt because they were all considering clauses framed in different terms and the duty of the court is to construe the clause in the contract before it and not get bogged down into comparisons with other clauses construed in other cases.
26. I would, for my part, applaud such an approach. But Mr Cogley submits that it is not appropriate if clauses of a similar nature have been construed in a particular way in the past. In deference to his argument, I fear that, unlike the judge, I have to refer to at least some of the authority on which he relied, particularly Aluminium Industries Vlassen B.V. v Romalpa Aluminium Ltd [1976] 1 WLR 676, a case more distinguished than followed in subsequent authority. In that case the clause read:-

"The ownership of the material to be delivered by A.I.V. will only be transferred to purchaser when he has met all that is owing to A.I.V. no matter on what grounds. Until the date of payment, purchaser, if A.I.V. so desires, is required to store this material in such a way that it is clearly the property of A.I.V. A.I.V. and purchaser agree that, if purchaser should make (a) new object(s) or if this material in any way whatsoever becomes a constituent of (an)other object(s) A.I.V. will be given the ownership of this (these) new object(s) as surety of the full payment of what purchaser owes A.I.V. To this end A.I.V. and purchaser now agree that the ownership of the article(s) in question, whether finished or not, are to be transferred to A.I.V. and that this transfer of ownership will be considered to have taken place through and at the moment of the single operation or event by which the material is converted into (a) new object(s), or is mixed with or becomes a constituent of (an)other object(s). Until the moment of full payment of what purchaser owes A.I.V. purchaser shall keep the object(s) in question for A.I.V. in his capacity of fiduciary owners and, if required, shall store this (these) object(s) in such a way that it (they) can be recognized as such. Nevertheless, purchaser will be entitled to sell these objects to a third party within the framework of the normal carrying on of his business and to deliver them on condition that – if A.I.V. so requires – purchaser, as long as he has not fully discharged his debt to A.I.V. shall hand over to A.I.V. the claims he has against his buyer emanating from this transaction."

It can be seen at once that the clause was not only different from the clause in the present case but was also of considerably greater complexity. Moreover the precise capacity in which the buyer had re-sold goods to sub-buyers was not the subject of any elaborate analysis because the contest was whether the plaintiffs were entitled to a specific sum in the receiver's hands which represented the proceeds of such sub-sales.

27. That said, however, this court did conclude that on the true construction of the first two sentences of the clause in that case, there was to be implied a right of re-sale to sub-buyers and that Romalpa in effecting that sub-sale were acting not only as agents but also as fiduciaries of the plaintiffs. Roskill LJ put the matter in this way:-

"Now, the crucial facts to my mind are two: first, that the defendants were selling goods which the plaintiffs owned at all material times; and secondly, that clause 13 as a whole is obviously designed to protect the plaintiffs, in the event of later insolvency, against the consequences of having parted with possession of, though not with legal title to, these goods before payment was received, 75 days' credit being allowed. When, therefore, one is considering what, if any, additional implication has to be made to the undoubted implied power of sale in the first part of clause 13, one must ask what, if any, additional implication is necessary to make effective the obvious purpose of giving the requisite security to the plaintiffs? One is, I think, entitled to look at the second part of clause 13 to answer this; for it would be strange if the first part were to afford no relevant security when the second part is (as I think) elaborately drawn to give such security in relation to manufactured or mixed goods.

I see no difficulty in the contractual concept that, as between the defendants and their sub-purchasers, the defendants sold as principals, but that, as between themselves and the plaintiffs, those goods which they were selling as principals within their implied authority from the plaintiffs were the plaintiffs' goods which they were selling as agents for the plaintiffs to whom they remained fully accountable. If an agent lawfully sells his principal's goods, he stands in a fiduciary relationship to his principal and remains accountable to his principal for those goods and their proceeds. A bailee is in like position in relation to his bailor's goods. What, then, is there here to relieve the defendants from their obligation to account to the plaintiffs for those goods of the plaintiffs which they lawfully sell to sub-purchasers? The fact that they so sold them as principals does not, as I think, affect their relationship with the plaintiffs; nor (as at present advised) do I think – contrary to Mr Price's argument – that the sub-purchaser could on this analysis have sued the plaintiffs upon the sub-contracts as undisclosed principals for, say, breach of warranty of quality.

It seems to me clear and so far from helping Mr Price [for the defendants] I think the second part of clause 13, properly construed, helps Mr Lincoln [for the plaintiffs] that to give effect to what I regard as the obvious purpose of clause 13 one must imply into the first part of the clause not only the power to sell but also the obligation to account in accordance with the normal fiduciary relationship of principal and agent, bailor and bailee. Accordingly, like the judge I find no difficulty in holding that the principles in Hallett's case, 13 ChD 696 are of immediate application, and I think that the plaintiffs are entitled to trace these proceeds of sale and to recover them, as Mocatta J has held by his judgment."

28. The first point to be made is that there does not seem to have been any clause in Romalpa corresponding to the "Relationship of the Parties" clause in the present case which negatives both "agency" and "fiduciary relationship". The second point is that the court did not have to consider the implication of the plaintiffs' entitlement to the proceeds of sale if those proceeds exceeded the sum for which the defendants were liable to the plaintiffs by way of the price of the goods. The court held that because the phrase "fiduciary owner" was used in the second part of the clause, it was to be implied into the first part of the clause and that that meant the defendant was accountable for the full proceeds of all sub-sales. Later cases have held that, if (as is often the case) a retention of title clause is to be construed as intended to give a seller security for the payment of the price, any trust of the proceeds only applies to the amount which the buyer owes the seller and does not extend to any balance over and above that amount, see Benjamin, Sale of Goods, (8^th ed. 2010) para 5-153. If the buyer is indeed beneficially entitled to proceeds over and above the amount of the debt, he cannot to my mind be regarded as selling as agent for the seller. It seems to me that the retention of title clause in the present case is intended to operate by way of security rather than to confer a potential windfall on the seller and that that must militate against the buyer acting as the seller's agent on the resale. That may mean, of course, that the buyer has created a registerable charge over the proceeds as was held to be the case in Pfeiffer v Arbuthnot Factors Ltd [1988] 1 WLR 150 and Compaq Computer Ltd v Abercorn Group Ltd [1991] BCC 484. But that is of no concern as between the immediate parties to the contract.
29. In these circumstances the Romalpa case is distinguishable from the present case since the clauses were in different terms.
30. The judge (para 60) highlighted a further difficulty with Mr Cogley's submission when he said:-

"It would in my judgment require clear words to constitute Holt Liverpool as agent for FG Wilson in making those resales, because it would render FG Wilson liable to Holt Nigeria on such contracts, the terms of which would be wholly outside its knowledge and control. The retention of title clause in its application to the trading between these parties does not so provide. The extended credit terms between the parties meant that all sales by Holt Liverpool to Holt Nigeria would be governed by the clause. If Mr Cogley QC's submissions were correct, it would render the entire trading relationship between FG Wilson and Holt Liverpool as one of principal and agent, with FG Wilson's true counterparty being Holt Nigeria. That was not the basis on which the parties dealt with each other in over a decade of trading, and the retention of title clause does not have to be construed in a manner which subverts the commercial intentions and expectations of the parties."

It would indeed be remarkable if it were the case that, once the credit terms had expired and any payment was due and unpaid, the contractual relationship of the parties were transformed from one of seller and buyer to one of principal and agent with the seller having no control of the terms on which his agent was re-selling. It is true that, at pages 690D-E of Romalpa in the passage already cited, Roskill LJ said that he did not think (as then advised) that the sub-purchasers could have sued sellers as undisclosed principals to the sub-contracts but he gives no reason why the usual rules as to the ability of an undisclosed principal to sue and to be sued on a contract made with his authority should not apply and, like the judge, I do not think that can have been the intention of the parties in this particular commercial relationship.

31. Mr Hollander pointed out another oddity in Mr Cogley's submission namely that the "no set-off clause" applies (and applies only) to claims for the price. Subject to arguments on the construction of the clause itself, the effect of Mr Cogley's argument is that it would never apply because there could never be a claim to the price, if the buyer were selling as the seller's agent. If the price had been paid, it was not needed; if the price had not been paid and property had not passed to the buyer no action would lie and it was pointless to provide that there was to be no set-off against a claim that could not be brought. There is, to my mind, force in that submission of Mr Hollander.
32. I would, therefore, distinguish the Romalpa case on the basis

i) that the clause was in different terms from the present case;

ii) that there was in that case no "relationship clause" purporting to negative agency and fiduciary relationship;

iii) that the retention of title clause in the present case was intended to operate by way of security charging the proceeds for sums due to the seller, so that the provision in the clause about the proceeds cannot mandate an agency relationship; and

iv) that the anti-set off clause can only operate if there is a claim to the price and that this consideration, like the relationship clause, negatives any intention to create an agency relationship.

33. In these circumstances I favour the construction of the clause adopted by the judge and subject to the argument on the construction of the no set-off clause would dismiss this appeal.

Construction of the "No set-off clause"; the Construction Issue

34. As will be recalled this clause provides:-

"Buyer shall not apply any set-off to the price of Seller's products without prior written agreement by the Seller."

35. Mr Cogley submitted that no price was "due" if there was what he called a "transactional" or "equitable" set-off. But this argument assumes what it wishes to prove and suffers from the disadvantage that the word "due" is not, in any event, present in the clause.
36. He then submitted that any clause purporting to exclude a right otherwise legally available must be expressed in clear words. But it is difficult to think of clearer words than that a party "shall not apply any set-off". "Any" must mean what it says. Mr Cogley had some difficulty in this court, as he had below, in indicating what set-offs are catered for by the clause. The best he could do was to say that the kind of set-off comprised in the Holt 1 claim was outside the scope of this clause. But that takes one straight back to the concept of transactional or equitable set-off and would imply that only legal set-offs were within the clause. That would be a most surprising result; indeed the average businessman who was told that a clause of this kind applied to legal set-offs but not equitable set-offs would hardly be able to contain his disbelief.
37. Mr Cogley referred us to Esso Petroleum v Milton [1997] 1 WLR 938 but that authority does not take the argument anywhere. The clause was a different clause and the construction of it, so far as relevant to the argument in this case, was not essential to the decision. Simon Brown LJ expressed one view, Sir John Balcombe another and Thorpe LJ preferred to express no view.
38. In my view, as in that of the judge, the set-off sought to be relied on by reference to the Holt 1 proceedings is just the kind of set-off envisaged by the clause.
39. I would therefore dismiss this appeal and do not need to engage with the question whether section 49 of the 1979 Act is exclusive or permissive (the Statutory Issue). In case my views on the other two issues are not shared by my colleagues, I should say a little about it.

The Statutory Issue

40. The issue here is whether FG Wilson can maintain an action for the price of the goods, even if property in the goods has never passed to Holt Liverpool and has at all times remained with FG Wilson. It will be remembered that s.49(1) of the 1979 Act provides that "where … property in the goods has passed to the buyer and he wrongfully neglects or refuses to pay for the goods … the seller may maintain an action against him for the price of the goods". Mr Hollander submits that the sub-section is permissive only and is not a statutory requirement that property must have passed before any action for the price can be maintained. He asks rhetorically why parties should not be able to agree that the price is due and payable at any time the parties agree that it should be due and payable. The answer to that rhetorical question is that a statute relating to the sale of goods could, of course, so provide but that the 1979 Act does not appear so to provide.
41. Section 49(1) does not stand alone, moreover. Section 49(2) specifically says that the seller can maintain an action for the price although property in the goods has not passed if "the price is payable on a day certain irrespective of delivery". The statute has therefore taken the trouble to spell out two circumstances where an action for the price can be maintained (1) when property has passed (2) if the price is payable on a day certain. As the judge said (para 39) if an action for the price could be maintained whenever the obligation to pay had arisen, section 49 would be largely otiose, a consideration which strongly suggests that section 49 intends to specify the only circumstances in which the seller may maintain an action for the price. I agree.
42. The text-book writers are uneasy about this. In the 4^th edition of Professor Sir Roy Goode's Commercial Law, for example, he says:-

"Section 49(1) is a curious provision. It emphasizes the obvious point that in order for the seller to be able to sue for the price, the price must have become due under the terms of the contract. But if this requirement is satisfied, why is there need of more? Why should the sub section add a further stipulation that the property in the goods shall have passed to the buyer? This would seem to be simply faulty drafting."

43. Section 49(1) and (2) first appeared in the 1893 Sale of Goods Act but I doubt if Sir Mackenzie Chalmers would accept that criticism. In 1893 it was axiomatic that a seller could not sue for the price unless property in the goods had passed. It would have been thought unfair to a buyer if, before delivery had occurred, the goods had perished or been damaged and yet the price was payable, unless the goods were actually his property, see Simmons v Swift (1826) 5 B & C 857. It would also be odd if a seller's creditors on bankruptcy could both seize goods still on his premises and sue the buyer for the price. The cases of Atkinson v Bell (1828) 8 B & C 277 where the buyer refused to accept or collect machines which he had ordered and Alexander v Gardner (1835) 1 Bing NC 671 where the buyer had to pay for goods lost at sea because he had taken up the bill of lading and only decided not to pay when he learnt of the shipwreck may be usefully contrasted. In the former case it was held that the seller could only sue for damages for non-acceptance which he was allowed to do (on terms as to costs) even though he had only sued for the price originally. In the latter case the property in the goods had passed and the price was due. All this was regarded as straightforward in Scott v England (1844) 14 LJQB 43 and in the commentary on the old common indebitatus count for goods bargained and sold in Bullen and Leake's Precedents of Pleadings (3^rd ed. 1868) pages 39-40.
44. It is no doubt true that retention of title clauses were less common in 1893 than they are today. But if a seller is happy to allow a buyer use of the goods without paying for them but wishes to ensure that he retains property in the goods and that he can sue for the price, he only has to provide for payment to be due on a day certain. That is what one would usually expect a seller to do; indeed that is what FG Wilson's terms and conditions do under the heading Prices and Payments where it is provided that the Buyer is to pay within 30 days of the date of the invoice. It is only the subsequent variations that have muddied the waters.
45. The majority of post 1893 cases assume that section 49 of the 1979 Act is mandatory. Stein Forbes & Co v County Tailoring Co (1916) 115 LT 215 is a good example. The plaintiffs sold 12,000 sheepskins cif London or Liverpool "net cash against documents on arrival of steamer". The defendants refused to pay for the last part of the consignment so the plaintiffs sued for the price. The sellers had reserved the right of disposal (a form of reservation of title) by making the bill of lading out "to order" but sued for the price although the property in the goods had not passed to the defendant. Atkin J held that the plaintiffs could not sue for the price although they had a good cause of action for damages for non-acceptance. He therefore adjourned the case to allow the plaintiffs' alternative damages claim to be disposed of. Colley v Overseas Exporters [1921] 3 K.B. 302, which related to a fob contract and the failure by the buyer to provide a ship, Muller, Maclean & Co v Leslie & Anderson (1921) 8 Lloyds Rep 328 and Plaimar Ltd v Waters Trading Co Ltd (1945) 72 CLR 304 at 318 per Dixon J are to the same effect.
46. This consistent stream of authority was interrupted by Minister for Supply and Development v Servicemen's Co-operative Joinery Manufacturers Ltd (1951) CLR 621 in which the Commonwealth of Australia had let premises and permitted the tenant to use wood-working machinery and equipment on the premises pending negotiations for the sale of machinery. A sale contract was subsequently made on terms "net cash before delivery" which was held to mean that payment was a condition precedent to the passing of property in the machinery. The purchase price was never paid and the Commonwealth demanded payment of the price and said that, if it was not paid, they would institute proceedings for the price. They later obtained possession of the machinery by resuming possession of the leased premises, whereupon the tenant and its liquidator sued the Commonwealth for conversion of the machinery which they alleged were their property. The High Court of Australia held that property had never passed because the machinery had not been paid for and delivery had not occurred. The tenant, however, asserted that the Commonwealth had elected to make delivery when they (a) claimed the price and (b) said they would bring proceedings to claim the price; property had therefore passed despite the provision for cash before delivery. If property had not passed, there would only be "a right to sue for damages and not a right to sue for the price of goods". Latham CJ dealt with this by saying (page 636):-

"But whether this is the case depends entirely upon the terms of the contract of sale. The price may be made payable at a time before delivery and an action for the price may be maintained though the property has not passed."

He made no reference to section 49(2) of the South Australia Sale of Goods Act which provided, as the English Act, that an action for the price could be maintained if the price was payable on a day certain with its inference that otherwise an action for the price would not be maintainable. Williams J agreed saying (page 642):-

"But the parties can make any contract they please with respect to the payment of the price and if they provide that it is to be paid before the property passes, the seller can sue for the price as soon as it becomes payable, for the payment of the price is a condition precedent to the passing of the property. Usually such a contract provides for the payment of the price on a day certain, but in the present case no day of payment is fixed. The purchase money would therefore have to be paid within a reasonable time. If it was not so paid it would become a debt for which the Commonwealth could sue although the property in the wood-working machinery and equipment had not passed to the society."

Webb J dissented on this point, adopting the traditional approach of English law and citing Stein Forbes. He agreed, however, that property had not in fact passed and that the correspondence did not amount to constructive delivery of the machinery and judgment was given for the Commonwealth. It is a curiosity of the case that the judgment of Dixon J in Plaimar does not appear to have been cited.

47. A decision of a divided High Court of Australia might not usually warrant such detailed citation but for the fact that the industry of Mr Jasbir Dhillon QC has unearthed an important decision of the English Court of Appeal which has followed the dicta of Williams J. Harry & Garry Ltd v Jariwalla and others (16^th June 1988; 1988 WL 1608 652) was a somewhat complex case in which the claimants bought sarees from the defendants which were of questionable quality; the claimants had accepted bills of exchange which they considered should be cancelled; a further agreement was then made that the defendant would either obtain the cancellation of the bills of exchange and their reissue for acceptance by somebody else or would themselves buy back 2494 sarees for £46,763.45 on terms that

"Goods belong to Harry Garry Limited until the full amount is paid. All goods cannot be sold until all documents transferred."

Cancellation and reissue of the bills never occurred; nor did the defendants pay for the 2494 sarees. The claimants therefore sued for the price of those sarees but the judge had refused them judgment on the basis that the property in the sarees had not re-vested in the defendants nor was the price payable on a day certain. Kerr LJ commented:-

"It would be ironical if that were the correct analysis. One would be driven to the conclusion that although these goods had been delivered and had been accepted, the only remedy open to the plaintiffs, if indeed they were the sellers of these goods, would apparently have been a claim for damages for non-acceptance under section 50, there being no other provision of the Act which would have given the plaintiff any remedy."

It may, with respect, be doubted whether the goods in that case had been "accepted" in a strict sense because, after they had been separated out, they had been taken away by the defendants "for the purpose of disposing of them", a purpose which was never substantially fulfilled. But Kerr LJ's comment must on any view apply with even greater force in the present case where the goods have actually been disposed of to third parties with the authority of the claimants.

48. In the event this court held that the unusual arrangement for the procurement of the cancellation of the bills and the re-sale of the sarees only as a secondary option did not constitute a contract for the sale of Goods at all. Section 49 of the 1979 Act did not, therefore, apply. But as a second reason Kerr LJ disagreed with Colley v Overseas Exporters without expressly overruling it and relied on the dicta of Williams J in the High Court of Australia to conclude that, having regard to the agreement as a whole, it would be open to the plaintiffs to sue for the agreed price "once a reasonable time had elapsed and it had become clear that they were not going to be relieved from the bills of exchange". Sir John Megaw agreed. This authority does not seem to have been referred to in any of the standard text books or in subsequent authority. It was understandably not cited to the judge.
49. Meanwhile Lord Keith of Avonholm in the course of his dissenting speech in White and Carter Councils Ltd v McGregor [1962] AC 413 had re-stated the orthodox view of section 49 of the 1979 Act. It will be remembered that the claim in that case was for the price of (providing advertising) services and the issue was whether it was open to the advertisers to refuse to accept their clients' repudiation of the contract and treat the contract as still subsisting without any obligation to mitigate their damages. Lord Keith said this (page 437):-

"I would refer first to contracts for the sale of Goods which were touched on in the course of the debate, for the reason that one of the remedies provided to the seller by the Sale of Goods Act 1893 is an action for the price. This however applies only in two cases. One is where the property in the goods has passed to the buyer … The only other case is where parties have contracted for payment on a day certain, irrespective of delivery or passing of property. This is a clear case of a contractual debt unconditioned by any question of performance by the other party. A much closer parallel with the present case is an agreement to sell future, or unascertained, goods. In this case there can be no appropriation of, and therefore passing of, property in the goods without the assent of buyer and seller. If therefore the buyer repudiates the contract before appropriation or refuses his consent to appropriation, there can be no passing of property. The seller is then confined to an action for damages for breach of contract. This, of course, is a rule of statute. But the Act is largely declaratory of English law, though not of Scots law …"

Mediterranean Export v Fortree Fabrics [1948] 2 All E.R. 186 per Lord Goddard CJ, Tradax v Goldschmidt [1977] 2 Lloyds Rep 604, 614 per Slynn J and Regent v Francesco [1981] 3 ALL All E.R. 327, 331 per Mustill J are to the same effect.

50. Lord Keith's remarks were subsequently referred to in Otis Vehicle Rentals Ltd v Cicely Commercials Ltd [2002] EWCA Civ 1064 in which the claimants had originally agreed to hire-purchase a number of tractor units on terms that the defendants would re-purchase the vehicles from the claimants after either 2 or 3 years at the claimants' option. The defendants refused to re-purchase the vehicles and the claimants brought an action for the re-purchase price or damages in the alternative. Property in the vehicles had never re-vested in the defendants and the claimants re-sold the vehicles to third parties. Her Honour Judge Kirkham sitting in the Birmingham Mercantile Court gave judgment for the price pursuant to section 49(2) of the 1979 Act on the basis that it was payable as a day certain. The defendants obtained permission to appeal and skeleton arguments were lodged on behalf of both parties but the claimants, who had already executed on the judgment and obtained the price, failed to comply with an order of Clarke LJ that the money be brought into court pending the appeal. As a result the claimants were debarred from appearing on the appeal and, in that sense, the appeal was unopposed. The court did, however, have regard to the claimant's skeleton argument; nevertheless it was satisfied that counsel for the defendants submissions were "correct as a matter of basic Sale of Goods law" (para 9). Those submissions were that section 49(2) of the 1979 Act did not apply because the price was not payable "irrespective of delivery" as required by the sub-section and that, in any event, the claimants were not able and willing to deliver the goods to the buyer. The court, having referred to the observations of Lord Keith, accepted those submissions and held that since property had not passed to the defendants, the claimants could only claim damages and the judge had, therefore, been wrong to give judgment for the price.
51. Popplewell J decided that the Otis case was binding on him and therefore rejected FG Wilson's submissions (that they could maintain an action for the price without bringing themselves within section 49 of the 1979 Act) "both as a matter of principle and authority".
52. It may be that, in the light of Harry and Garry, it would be open to this court to disregard Otis on the basis that we are entitled to choose between conflicting authorities at our own level of precedent. Nevertheless I agree with the judge to the extent of being persuaded that, if there is a potential claim for damages for non-acceptance, then, if property has not passed to the buyer, the seller should be confined to that claim rather than a claim for the price. We should follow our own latest decision unless it is obviously wrong; I do not think Otis is obviously wrong. On the contrary, as the judge said it accords with principle.
53. I should perhaps add that Mr Hollander's reliance on section 55 of the Act and the dicta of Lord Diplock in Christopher Hill v Ashington Piggeries [1972] AC 441, 501 seems to be misplaced since that section and those dicta relate to terms to be implied into the contract, rather than to express requirements of the Act.
54. That does not, however, resolve the problem if there is no realistic claim for damages for non-acceptance. That is what concerned Kerr LJ when he commented that it would be "ironical" if damage had to be recovered for supposed non-acceptance when the goods had been accepted. It would be even more ironical in the present case where the goods appear to have not only been accepted but disposed of for good consideration to third parties.
55. The only alternative is to suppose that there might be a claim for damages for failure to pay the price. Neither Mr Cogley nor Mr Hollander, for their different reasons, espoused any such claim and it immediately runs into the difficulty that English law does not normally allow a claim for damages for failure to pay money. There is, moreover, a logical difficulty in saying that Holt Liverpool are in breach of contract in failing to pay the price if the price is itself not due because property in the goods has never passed to them.
56. I therefore find myself in the somewhat unsatisfactory position of concluding that, if property never passed to Holt Liverpool, FG Wilson have no claim for the price nor even a claim to damages. That is just an inherent result of a retention of title clause and shows that it has dangers as well as benefits.
57. As, however, I think property in the goods has passed, FG Wilson are, in my opinion, entitled to the price they claim and are entitled to judgment for that sum. Left to myself, I would therefore dismiss this appeal; but since my Lords disagree with me on that point, the appeal will be allowed.

Lord Justice Patten:

58. As Longmore LJ has explained, the principal issue facing the judge was whether Holt Liverpool could rely on its counterclaim for damages for alleged breaches of the distributor agreement (the Holt 1 Claim) and what has been called the Repayment Agreement as an equitable set-off against FG Wilson's claim for the sums due to it under the contract. That depends on whether the no set-off clause operates in the claimant's favour. Apart from an argument that the no set-off clause does not, on its true construction, apply to an equitable set-off, the argument on this issue has been confined to two questions: first, whether a claim for the price of the goods (which it is common ground is the only type of claim available to Holt Liverpool that engages the no set-off clause) has to satisfy the conditions set out in s.49(1) of the Sale of Goods Act 1979 ("the 1979 Act"); and second whether, if the s.49(1) conditions do have to be satisfied, the retention of title clause contained in FG Wilson's standard terms and conditions has the effect of preventing title from passing until the price is actually paid.
59. For the reasons which Longmore LJ gives, I am unpersuaded by Mr Cogley's argument that the no-set off clause should be construed so as to exclude a transactional or equitable set-off of the kind that is at issue in these proceedings. The words used in the relevant condition are clear and it must be assumed that the condition was drafted in this way to achieve its obvious commercial purpose of ensuring that the price is paid free of any underlying disputes about the goods sold or any related matter.
60. But, for much the same reason, I take a different view from Longmore LJ about the construction to be placed on the retention of title clause where it deals with onward sales by the purchaser prior to title passing from the claimant seller. It is not disputed by Mr Hollander that the first sentence of the relevant part of the clause "Notwithstanding delivery and the passing of risk in the products, title shall not pass to Buyer until Seller has received payment in full for the products and all other goods or services agreed to be sold by Seller to Buyer for which payment is then due" operates to preserve title in the goods in the seller until payment of the price. Consistently with this, the next sentence "Until such time as title passes, Buyer shall hold the products as Seller's fiduciary agent and shall keep them separate from Buyer's other goods" requires the buyer to keep the relevant goods separate. Although the buyer is described as a fiduciary agent, it is not at that stage a trustee of the goods in the conventional sense because it has no title to the property on which any trust can be impressed. But when it then disposes of the goods, it does acquire a title to the monies paid into its account by the sub-purchaser. And, as the next sentence makes clear "Prior to title passing Buyer shall be entitled to resell or use the products in the ordinary course of business and shall account to the Seller for the proceeds of sale", it is required to account for the proceeds of sale and not simply for such of the proceeds as are required to satisfy its liability for the price under the contract with FG Wilson.
61. An obligation to account for the entire proceeds of sale is, in my view, only consistent with the buyer remaining a fiduciary agent throughout the process of the sub-sale. If, as FG Wilson contends, the purpose of the sub-sale provision was to convert a retention of title clause into a charge over the proceeds of sale necessary to secure the debt due to the claimant, it could not have been more badly or absurdly drafted. The much more natural construction of the clause as a whole is that its purpose is set out in the first of the three sentences I have quoted and that the second and third sentences are merely sub-provisions spelling out the obligations of the buyer in circumstances where title has not yet passed. The paragraph of the terms and conditions headed "Title and Risk of Loss" begins with the unequivocal statement that title shall not pass to the buyer until the seller has received payment in full and the second and third sentences are both concerned with that same intervening period: "Until such time as title passes" and "Prior to title passing". There is nothing in these sentences to suggest a different regime was intended to apply from that set out in the first sentence and the answer to the judge's point that the clause does not state that the buyer is to sell as agent is that this is the inevitable consequence of the application of the first and second sentences I have referred to. This is consistent with the clause as a whole having been drafted by the claimant to be an effective retention of title provision. As Longmore LJ has said in paragraph 56 of his judgment, there are dangers as well as benefits in such a provision.
62. Some reliance has been placed by the claimant on the clause headed "Relationship of the Parties" which states that:

"Nothing herein contained shall be deemed to create an agency, joint venture, partnership or fiduciary relationship between the parties hereto".

63. But that clause (as its terms make clear) is intended to limit the trading relationship between the parties to an ordinary contractual relationship of seller and buyer on the terms and conditions set out. It was obviously not intended to negative the express imposition of an agency under the "Title and Risk of Loss" provisions and does not, in my view, assist in construing those terms.
64. Mr Hollander seeks to support his construction of the third sentence by reading "the proceeds of sale" as meaning the proceeds of sale necessary to pay the price due to FG Wilson. But this is not what it says or, as written, means and in standard conditions of this kind we should, I think, be very cautious about reading words in when they are not there.
65. Like Longmore LJ, I think that many of the cases are only of limited assistance because they all turn on the particular wording of the contracts under consideration. In Pfeiffer v Arbuthnot Factors Ltd [1988] 1 WLR 150 the purchaser was required to pass on to the buyer "his profit amounting to his obligation towards [the seller]" which Phillips J understandably construed as limited to the obligation to the debt due. In Compaq Computers Ltd v Abercorn Group Ltd [1991] BCC 484 Mummery J in setting out the principles applicable to the construction of retention of title clauses said (at p. 493):

"(4) An unpaid seller, who contends for a direct claim (other than by way of charge) to the proceeds of sale of goods sub-sold by the original buyer, cannot establish an equitable right to or to trace the proceeds simply by relying on the retention of title to the physical goods sub-sold. There is no equity to trace into a mixed fund in the absence of a fiduciary relationship. The unpaid seller must establish that there was a fiduciary relationship between himself and the original buyer affecting the proceeds of sale.

(5) The existence of a fiduciary relationship in this context depends on whether the parties have agreed terms, either expressly or by implication, which, when construed in the context of the whole agreement and the surrounding circumstances of the individual case, are appropriate to create such a relationship.

(6) The relationships of bailor and bailee and principal and agent are normally fiduciary, but not necessarily so. Contractual or juridical labels are not conclusive of the nature of the relationship. In the Romalpa case the fiduciary relationship of bailment was conceded by counsel and there was a finding that there was a relationship of agency with an implied power of sale on account of the unpaid seller and a fiduciary obligation to account fully to him for all the proceeds of sale. Later cases illustrate how the existence of a fiduciary relationship in the cases of bailment or agency may be negatived by contractual terms inconsistent with the existence of fiduciary obligations. For example, it has been held that there was no implied fiduciary relationship where the buyer was expressly allowed credit for a fixed period and could make sub-sales of the goods during the period of credit and use the proceeds of sales effected within that period as he wished, or where the buyer was permitted to mix the proceeds of sale with his own money and then deal with them as he pleased in his business. Such provisions are more consistent with the relationships of buyer and seller and of debtor and creditor than with a fiduciary relationship."

66. None of the features referred to in (6) are present in this case. On the contrary, the buyer is required to account for the proceeds of sale which is the hallmark of a fiduciary relationship.
67. The judge said that to construe the entirety of the clause as an effective retention of title provision would be uncommercial because it would expose FG Wilson to liability under the contacts with the sub-purchasers. But that was a feature of the retention of title clause considered by this Court in Aluminium Industrie Vaassen BV v Romalpa Aluminium Ltd [1976] 2 All ER 552, [1976] 1 WLR 676, CA. which is quoted by Longmore LJ at [26] above and, as is apparent from the passage quoted at [27], Roskill LJ had no difficulty in the concept that, as between the defendants and the sub-purchasers, the defendants sold as principals. This reasoning has never been held to be bad in law and I see no reason to assume that the draftsman of the claimant's standard conditions thought otherwise.
68. For these reasons, I accept Mr Cogley's submission that title did not pass under the retention of title clause until payment of the price. Mr Hollander submitted that this would render the no set-off clause redundant because there could never be a claim for the price if the buyer sub-sold the goods. But that, I think, assumes that the no set-off clause is directed only to the seller's ability to sue. It is in fact a provision governing the terms of payment and makes it clear that payment when due cannot be withheld or reduced on the grounds of some counterclaim and set-off. The ability of the seller to sue for the price is a different question which depends on the construction of s.49(1) and the question whether it provides an exhaustive code for the recovery of the price. Although that issue becomes of critical importance in relation to a contract with an effective retention of title clause, there is no reason to suppose that in this case that was seen as a problem by the draftsman of the conditions of sale. FG Wilson would have a claim against the appellant as a fiduciary agent to account for the proceeds of sale. Holt Liverpool could not set up a counterclaim and set-off of the kind at issue in these proceedings against its liability as a fiduciary to account for the proceeds of sale. In the case of a sub-sale, the no set-off clause was not needed. But if the purchaser chose to pay rather than to litigate, the no set-off clause makes it clear what was due.
69. I agree with Longmore LJ for the reasons which he gives that to bring a claim for the price FG Wilson must comply with the conditions set out in section 49(1) of the 1979 Act. It follows that I would allow the appeal and set aside the order for payment of the price.

Lord Justice Floyd:

70. I have read in draft the judgments of Longmore and Patten LJJ. Patten LJ agrees with Longmore LJ on the following issues:

i) That the "no set-off clause" would on its true construction cover the Holt 1 claim and the claim for breach of the Repayment Agreement, so as to prevent those claims from being used to defeat a claim for the price (what Longmore LJ has called "the Construction Issue");

ii) A claim for the price under the contract means a claim which falls within section 49 of the Sale of Goods Act 1979: FG Wilson cannot have a claim for the price independently of that section. Accordingly their claim must satisfy the provisions of that section if it is to take advantage of the "no set-off" clause (what Longmore LJ has called "the Statutory Issue".

71. I also agree with Longmore and Patten LJJ on the Construction Issue and the Statutory Issue.
72. The issue which has divided Longmore and Patten LJJ concerns whether FG Wilson's claim satisfies section 49 ("the Action for the Price Issue"). That issue turns on whether property has passed to Holt as buyer, which the section makes a mandatory precondition of the seller being able to "maintain an action … for the price of the goods".
73. Holt maintain that property has not passed because of the terms of the retention of title clause which are, so far as material, as follows:

"TITLE AND RISK OF LOSS: … Notwithstanding delivery and the passing of risk in the products, title shall not pass to Buyer until Seller has received payment in full for the products and all other goods or services agreed to be sold by Seller to Buyer for which payment is then due. Until such time as title passes, Buyer shall hold the products as Seller's fiduciary agent and shall keep them separate from Buyer's other goods. Prior to title passing Buyer shall be entitled to resell or use the products in the ordinary course of business and shall account to the Seller for the proceeds of sale. If the Buyer fails to comply with a demand from the Seller to return products to which title has not passed, Seller may forthwith enter any premises where the products are stored and repossess them."

74. Thus FG Wilson retain property in the goods until paid. However this does not mean that Holt cannot sell the goods before they have paid for them and thus before title passes. They are expressly permitted to do so. If they do so, however, the proceeds of sale must be accounted for to the seller. I have to say that the natural reading of those arrangements is that property never passes to Holt: immediately before and at the moment of the sub-sale the goods remain the property of FG Wilson.
75. The judge held that title did pass to Holt Liverpool at the instant of or immediately before the sale to Holt Liverpool. He so held on the ground that the clause did not say that the buyer sells as the seller's agent: it said only that the buyer held the goods as the seller's agent. Thus, when it came to the time for the sale to the sub-buyer, title does pass, and the buyer sells as principal. For my part I cannot accept that analysis. The entitlement to resell is expressly described as being in the period "prior to title passing". During the whole of that period the goods are held by the buyer as the seller's fiduciary agent. The contract did not need to say that the goods were sold (as opposed to held) as agent for the seller. The conclusion that if the buyer sells during that period he does so as the seller's fiduciary agent seems to me to be inescapable.
76. The conclusion that the sub-sale is as agent and not principal is reinforced by the fact that the entire proceeds of sale are to be held for the seller, such proceeds of course including any profit element on the sub-sale. That is entirely consistent with the view that the sub-sale was of goods belonging to the seller, and at odds with the idea of a sub-sale as principal, where the sub-seller would only be liable for the price.
77. I do not find it possible to reach a different conclusion in the light of the later clause which provides:

"RELATIONSHIP OF THE PARTIES: Nothing herein contained shall be deemed to create an agency, joint venture, partnership or fiduciary relationship between the parties hereto …"

78. I do not think that clause would be understood as contradicting the express terms of the earlier clause relating to title and risk of loss. Those terms describe the capacity in which the goods are held pending payment as that of fiduciary agent. Accordingly the later clause must be read as subject to those earlier terms which expressly create an agency.
79. I agree with my Lords that authorities on the construction of other clauses are of little or no assistance. It seems to me that the proper construction of the contract we are considering on this appeal does not result in title passing to Holt in the event of sale to a sub-buyer.
80. In the result I agree with Patten LJ, for the reasons he gives and for those which I have expressed, that the appeal should be allowed.