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Will English Romalpa Clauses become Registrable Securities?
Published online by Cambridge University Press: 16 January 2009
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A Romalpa clause provides that, even after delivery, the seller retains title to goods agreed to be sold, until payment of the price of those goods or, in many cases, until payment of all sums due to the seller from the buyer. Its object is that, should payment not eventuate, the goods, though in the buyer's possession, are still the seller's property and available for resale by him. In the Scottish appeal of Armour v. Thyssen Edelstahlwerke A. G.1 the House of Lords encountered this example of a Romalpa clause:
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References
1 [1991] 2 AC. 339.
2 [1985] 1 W.L.R. 111, cited in [1991] 2 A.C. 339 at 353E.
3 [1921] 1 A.C. 41Google Scholar, 49. Though a tax case, it refers to the normal meaning of “securities”.
4 Ibid. at 53.
5 Ibid. at 57–58.
6 [1976] I W.L.R. 676, 688.
7 [1990] Ch. 744, 760c. The buyer's interest in the goods, required by this definition, is found on analogy with the interesse termini expounded in Baker v. Lewis [1905] 1 Ch. 46, 51–52. Cf. the implications of Honoré's use of “interest” in Guest, A.G. (ed), Oxford Essays in Jurisprudence. First Series (Oxford 1961), p. 108.Google Scholar See further note 21 below.
8 Gloag, W. M. and Irvine, J.M.The Law of Rights in Security Heritable and Moveable including Cautionary Obligations (Edinburgh 1897), p. 187,Google Scholar quoted by Lord Keith [1991] 2 A.C. 339 at 351G.
9 “Diligence” is a Scottish mode of execution of judgments.
10 As to the seller's obligation to have or obtain property in the goods, see the Sale of Goods Act 1979, ss. 2(1) and 12.
11 Op. cit., p. 1.
12 Howard v. Miller [1915] A.C. 318, 326. This lien, being akin much more to a charge than to the mere right of retention given to a lienor at law (Walker v. Ware etc. Rly. Co. (1866) L.R. 1 Eq. 195, 200), is undoubtedly a security. Contrast note 34 below.
13 Burlinson v. Hall (1884) 12 Q.B.D. 347, 350.
14 Thus, as para. 1618 of the Cork Report (Cmnd. 8558, 1982) sets out, there is plenty of room for the operation of retention of title, despite the limitations it summarises.
15 [1985] 1 W.L.R. 111 per Goff L.J. at 115H, Oliver L.J. at 123c and Donaldson MR. at 125D.
16 [1991] 2 A.C. 339 at 353B.
17 And of the equitable lien which is held by, inter alios, an unpaid vendor of land.
18 Nor did the minority, Lords Wrenbury and Phillimore, in Singer v. Williams [1921] 1 AC. 41 at 59 and 63.
19 “ Per Donaldson M.R., [1985] 1 W.L.R. 111 at 125D–G.
20 Our emphasis.
21 Property passes when intended to pass. The parties' intention, that property will eventually pass, makes the contract one for the sale of goods—s. 2(1)—and from the beginning gives the buyer the interest referred to in note 7 above. A Romalpa clause is a dealing by the buyer with that interest and the effect of the clause is thus not a mere operation of law.
22 “A Review of Security Interests in Property”, dated 7 November 1988.
23 Such as at note 12 above.
24 [1992] B.C.L.C. 148.
25 E.g., per Dillon L.J. Ibid. at 168F–169B.
26 E.g., Ibid. per Dillon L.J. at 154B–C, 160I, 162I–163A and 165E–F; and Staughton L.J. at 185G and 190A.
27 This is a necessary and inseparable incident to a mortgage and, no matter how the transaction may be disguised, Equity will avoid any attempt to clog or fetter that proprietary right—Chambers v. Goldwin (1801) 5 Ves. 834; affd on appeal (1804) 9 Ves. 254; Santley v. Wilde [1899] 2 Ch. 474, 474–5. Because a mortgage thus entails the transferor's retention of some, and his intention never to surrender all, proprietary interest (albeit only equitable) in the goods, it is incompatible with a sale—Re George Inglefield Ltd. [1933] Ch. 1, 27; Re Curtain Dream p.l.c. [1990] B.C.L.C. 925, 937H.
28 See text at note 13 above.
29 I.e., Acts, past and present, on companies and bills of sale. Cf. Guest, A.G. (gen. ed.), Benjamin's Sale of Goods, 4th ed. (London 1992), para. 1–065.Google Scholar
30 1989S.L.T. 182, 187H–K.
31 Note 21 above.
32 Property not to pass while seller reserves right of disposal.
33 Rescission on resale by the seller pursuant to expressly reserved right.
34 Conversely, if necessary, this maxim would enable section 41 to prevail over section 62(4), so as to preserve the legal lien of the unpaid seller. However, there seems no need; for, pace the Insolvency Act 1986, s. 248(b), the mere right of retention of a physical asset comprised in a legal lien—Hammonds v. Barclay (1802) 2 East 227, 235—is outwith Viscount Cave's definition of security at note 3 above.
35 Allen v. Emmerson [1944] K.B. 362.
36 Erskine Inst III v 5; Bell Comm. I, 252.
37 As in former definitions of a bankrupt's estate, e.g.. Bankruptcy Act 1914, s. 38(c), and in the requirements, still current, to register a company's charges and an individual's bills of sale.
38 [1991] 2 A.C. 339 at 354A.
39 I.e., property passed as in, e.g. Compaq Computer Ltd. v. Abercorn Group Ltd. [1991] B.C.C. 484.
40 Sale of Goods Act 1979, s. 2(4) and (5).
41 [1991] 2 A.C. 339 at 343D. Nor in the cases there cited were any debts or other obligations secured.
42 In Hansard (Lords) vol. 505, column 1197, Lord Strathclyde, one of the promoters, is reported on 6 April 1989 (before the present Companies Act 1989, s. 93 was inserted by a Commons' amendment) as saying of the Companies Bill, “The looser usage of the expression ‘security rights' is often used with reference to rights of reservation by the owner of the property, such as certain clauses reserving title to the seller in a contract for the sale of goods or a bank's retention clause over a customer's bank balance. To define charge as including any security in relation to England and Wales might therefore give rise to ambiguity as to whether certain contractual provisions, which are not at present registrable because they do not constitute a mortgage, lien, pledge or (in the strict sense) a charge, have thereby been made registrable.” (While welcoming his Lordship's support, we respectfully deprecate the disparagement, if any, implicit in his use of “looser”.) Cf. the DTI's consultative document (URN 94/635) on “Proposals for Reform of Part XII of the Companies Act 1985”, para. 23. Contrast Ibid., paras. 27–30.
43 Carney v. Herbert [1985] A.C. 301,311B (quoting with approval from McFarlanev. Daniell (1938) 38 S.R. (N.S.W.) 337, 345).
44 Ibid. at 316c and, on the similarity in this respect between the two jurisdictions, 314D.
45 [1991] 2 A.C. 339 at 344c. Contrast Carney v. Herbert [1985] A.C. 301 at 316E–H.