Bringing An Action For The Price Of Goods/No Set-Off Means No Set-Off

FG Wilson (Engineering) Limited v. John Holt & Company (Liverpool) Limited [2012] EWHC 2477 (Comm)

This Commercial Court decision highlights some interesting issues arising in the context of a sale of goods dispute. In particular, it clarifies when an unpaid seller can bring an action for the price of the goods supplied and illustrates how a retention of title ("ROT") clause in the sale contract might affect the position. It also confirms the English courts' policy of upholding no-set off clauses, where they have been negotiated by commercial parties with similar bargaining power and are considered to be reasonable within the meaning of section 11 of the Unfair Contract Terms Act 1977 ("UCTA").

The background facts

FGW supplied generators and spare parts to Holt Liverpool, who then exported them to Nigeria for sale locally to and then by their subsidiary, Holt Nigeria. The relevant provisions in the parties' agreement, which incorporated FGW's standard terms and conditions, were as follows:

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

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...

FGW sought summary judgment against Holt Liverpool in the English Commercial Court in respect of various claims for the price of goods supplied to Holt. Holt had various claims against FGW and sought to set those claims off against FGW's claims. We summarise below the most significant aspects of the court's decision.

The Commercial Court decision

Action for the price

Section 49 of the Sale of Goods Act 1979 provides as follows:

Where, under a contract of sale, the property in the goods has passed to the buyer and he...