FG Wilson (Engineering) Ltd v John Holt & Company (Liverpool) Ltd

A seller may maintain an action for the price of goods only within the circumstances identified by section 49 of the Sale of Goods Act 1979. Property may pass for that purpose where goods are resold with the seller’s consent under a retention-of-title clause.

A clearly worded term prohibiting any set-off can exclude transactional, legal and equitable set-offs. Such a term is not construed as an exclusion clause. A no-set-off clause may satisfy the reasonableness requirement under the Unfair Contract Terms Act 1977 where it protects commercial cash flow, is customary, is notified to sophisticated parties and operates subject to extended credit terms.

FG Wilson claimed approximately US$12 million from Holt Liverpool for generators, spare parts, haulage, training, software licences and interest. Holt Liverpool relied on an alleged distributor-related cross-claim and an alleged repayment agreement, contending that these claims could be set off against FG Wilson’s invoices.

FG Wilson applied for summary judgment. A preliminary issue was tried as to whether its standard no-set-off clause was incorporated, applied on its proper construction, and satisfied the reasonableness requirement under the Unfair Contract Terms Act 1977. The court also considered whether FG Wilson had an action for the price under section 49 of the Sale of Goods Act 1979, and the applicable credit terms.

1. Summary judgment and price claim. The court applied the summary-judgment principles under CPR 24.2. Section 49 of the Sale of Goods Act 1979 identifies the circumstances in which an action for the price may be maintained. It is not enough that the contractual obligation to pay has fallen due. The seller must bring the claim within section 49(1) or section 49(2).
2. FG Wilson satisfied section 49(1). The retention-of-title clause did not make Holt Liverpool an agent when reselling the goods. In any event, property passing to a sub-buyer through the buyer’s agency would satisfy the rationale of section 49(1), where the seller had consented to resale.
3. The alleged repayment agreement had no realistic prospect of being established. The evidence showed discussions about resuming supply and repayment, not a binding commitment to supply minimum quantities. The alternative estoppel by convention claim also failed because there was no shared or acquiesced assumption.
4. The standard terms were incorporated into the contracts. The online ordering systems, invoices, prior dealings and the parties’ commercial sophistication gave reasonable notice. The no-set-off clause was not unusual or particularly onerous and did not require special notice.
5. On its proper construction, the prohibition on applying “any set-off” to the price clearly excluded the Holt 1 Claim and was not confined to warranty claims, legal set-offs or equitable set-offs. The invoiced price included VAT.
6. The clause fell within section 3(2) of the Unfair Contract Terms Act 1977, but satisfied section 11. Relevant considerations included the commercial need to protect cash flow, the clause’s customary and limited operation, Holt Liverpool’s sophistication, the parties’ bargaining position, notice of the clause and FG Wilson’s credit insurance. Remote hypothetical claims involving admitted credits, fraud or deliberate wrongdoing did not make the clause unreasonable.
7. The credit terms gave Holt Liverpool an arguable case that payment was due on the 25th day of the fifth month after invoice. FG Wilson was therefore entitled to summary judgment, with interest and late-payment charges recalculated on that basis. The preliminary issue was answered affirmatively.