Fashoff (UK) Ltd (t/a Moschino Forall Confezioni Spa) v Linton & Anor

Permission to repossess goods during an administration is discretionary. The applicant must establish a seriously arguable proprietary claim and show that the goods remain in the company’s possession, including any continuing constructive possession. The court must then consider whether repossession would impede the purpose of the administration and balance the applicant’s legitimate interests against those of the company and its creditors. Promptness is important. Delay which frustrates the administration or prevents distribution to creditors may itself justify refusal. The guidance in In re Atlantic Computer Systems remains highly persuasive, including the weight ordinarily given to proprietary rights and the relevance of the conduct of the parties.

Fashoff and Forall supplied clothing to Baron Jon Menswear Ltd under terms said to contain retention of title clauses. Baron Jon entered administration, and its stock was sold to Premium Retail Ltd by the administrator, who agreed that valid claims would be honoured for a limited period. The claimants delayed in pursuing their claims and later applied under paragraph 43(3) of Schedule B1 to the Insolvency Act 1986 for permission to repossess goods. The central issues were whether the claimants had seriously arguable title claims, whether the goods remained in the company’s possession, and whether permission would impede the administration.

1. The applications were refused. The claimants had to establish a seriously arguable case and satisfy the court that permission should be granted in the circumstances of the administration.

2. Under paragraph 43(3) of Schedule B1 to the Insolvency Act 1986, the court’s discretion must be exercised in the context of the statutory purpose of administration. The guidance in In re Atlantic Computer Systems was applied. The court considered the purpose of the administration, the effect of permission on the administration, the applicant’s loss, the interests of other creditors, the prospects of achieving the administrator’s objectives, the history of the administration and the parties’ conduct.

3. Whether goods are in the company’s possession must be assessed when permission is sought. Goods sold outright to a third party were no longer in the company’s possession. Any arguable constructive possession arising from an agreement requiring the purchaser to retain the goods during a limited period ended when that period expired. The reasoning in Re David Meek Plant Ltd was applied.

4. The claimants’ delay was substantial. Fashoff knew by early July 2006 that it considered the administrator’s position prejudicial, yet did not apply promptly. Forall delayed for nearly eight months after rejection of its claim. The delay prevented distribution to creditors and was contrary to the objectives of the Act. It independently justified refusal.

5. On the merits, Fashoff had not shown that it could enforce the claim on behalf of Unionseta, that the Italian-law terms gave a viable claim, or that Baron Jon had accepted the later English terms. The principle concerning contractual terms on the reverse of documents was applied from White v Blackmore. Forall had also failed to establish standing during the material period because the relevant claims appeared to have been assigned to factors or Barclays Bank.

6. Even if either claimant had established a seriously arguable claim, granting permission would probably impede the administration. The applications were therefore refused.

Not stated in the judgment.