Ratten & Anor v Ultra Motorhomes International Ltd & Anor

A contractual transfer of business assets should be construed practically, so far as possible giving effect to the commercial purpose of the arrangement. A retention-of-title clause referring to payment in full may prevent the transferee from passing title to individual assets until all sums due under the sale agreement have been paid, unless the retained-title holder consents to release. Authority to make ordinary trading contracts does not ordinarily include authority to grant security over a valuable company asset. A security transfer is ineffective if the grantor lacks title or power of disposal. Separately, an unregistered security interest over a company’s property may be void against its liquidator and creditors.

The supervisors of the company voluntary arrangement of Ultra Motorhomes International Ltd sought possession of Vehicle 48, a motor home removed from the jurisdiction by Behlke Electronic GmbH, together with consequential damages. Vehicle 48 had originally belonged to Ultra Motorhomes. Its business and assets were transferred to Ultra Vehicle Design Ltd under a hive-down arrangement made during the company voluntary arrangement.

Behlke relied on a security agreement by which Ultra Vehicle Design purported to transfer ownership of Vehicle 48 as security for an advance payment towards the completion of another vehicle. The issues were whether Vehicle 48 had passed to Ultra Vehicle Design, whether title had been retained under the sale agreement, whether the security agreement was authorised and effective, and whether it was void for non-registration.

1. Title under the sale agreement. The reference to “any motor vehicles” in clause 2.2.9 did not exclude Vehicle 48 from the transfer. Although it was a motor vehicle, it was also stock in trade and was created as a demonstration vehicle available for sale. A construction excluding it would frustrate the commercial purpose of transferring the business, its stock and its trading assets. The practical approach in Re Brelec Installations [2000] was applied.
2. Retention of title. Clause 5.1 required payment in full of all sums due under clause 4, not merely payment of the instalments then overdue or attributable to the particular vehicle. Ultra Vehicle Design therefore could not pass good title to Vehicle 48 without Ultra Motorhomes’ consent.
3. Authority and release. The manager had authority to negotiate and enter ordinary contracts for the production and sale of vehicles. A one-off agreement granting security over a valuable asset fell outside that general authority and required express authority. In any event, there was no evidence that Ultra Motorhomes had consented to release its retained-title rights. No waiver or release could be implied, since that decision required consideration of the interests of the company’s creditors.
4. German law. A Sicherheitsübereignung des Fahrzeugs transferred ownership for security purposes and required the grantor to own, or have power to dispose of, the asset. Ultra Vehicle Design had neither. The security agreement was consequently ineffective, and the supervisors were entitled to delivery up and an assessment of damages.
5. Registration. As an alternative, the security agreement would have been void and unenforceable against the liquidator and creditors for want of registration under sections 395 and 396 of the Companies Act 1985. The registration provisions applied to charges created by an English company regardless of the proper law of the instrument, following Re Weldtech Equipment [1991] BCLC 393. The security interest was equivalent to a mortgage and therefore fell within the relevant statutory definitions.