ROT Claims – The Rules Of The Game

Re: Blue Monkey Gaming Limited v Hudson & Others [2014]

The above reported case provides some useful guidance in relation to the steps required to be taken by office-holders in identifying retention of title ("ROT") property and adjudicating ROT claims.

The Court held that the administrators were not obliged to identify property owned by a third party and were entitled to reject that third party's ROT claim on the basis of the incomplete evidence submitted by it.

FACTS

The case arose out of the administration of the Agora Group which was one of the largest operators in the UK Adult Gaming Industry. MDM Leisure Ltd ("MDM") supplied fruit machines to the Agora Group for its use in arcades. Each invoice contained an ROT clause which specified: "the legal ownership of goods herein is retained by the seller until full and final settlement".

When the Agora Group entered administration in December 2009, MDM claimed to be owed nearly £4,000,000 in respect of gaming machines allegedly subject to the ROT clause. MDM assigned its claims to the Claimant, Blue Monkey Gaming Limited ("BMG").

BMG subsequently pursued a claim in conversion personally against the administrators on grounds that the administrators: (a) had caused or procured the company to use MDM's machines to make money for the administration outside the terms of bailment pursuant to which they had originally been supplied; and (b) ought to have delivered up the machines to MDM after an alleged unequivocal demand for their return.

In this case, the administrators had traded the businesses (at a loss) and subsequently agreed a sale of certain of its business and assets. The sale documentation included the usual terms about title and excluded ROT assets from the sale.

The Court dismissed the claim and held the administrators were not liable for wrongful interference with the supplier's goods.

ISSUES BEFORE THE COURT

An action for wrongful interference with goods (that is to say, conversion) comes within the meaning of section 1(a) of the Torts (Interference with Goods) Act 1977. The most common way of showing a conversion by unlawful retention of property is to prove that the defendant, having the asset in his possession, refused to give it up on demand made by the party entitled to possession (Barclays Mercantile v Sibec Ltd [1992] 1WLR 1253).

In this case, the court had to consider whether the administrators were personally liable in a claim for conversion on grounds that the administrators...