Contracts (Retention of Title Clauses) (Hansard, 5 May 1977)

§ Mr. Les Huckfield

The latest available information, for 1971, is set out in the following table.

"Retention of Title" clauses in conditions of sale and contract; and if he will make a statement concerning the EEC position in this matter, especially as it will affect companies in this country in the future;

(2) what representations he has received from the CBI concerning the increasing use by companies of the "Retention of Title" clauses in conditions of sale and contract;

(3) what representations, if any, he has received from clearing banks and accountancy bodies concerning the increasing use by companies of the "Retention of Title" clauses in conditions of sale and contract;

(4) what is the current practice of nationalised industries in regard to the use of "Retention of Title" clauses in conditions of sale and contract;

(5) if he will list the differences between Scots and English law in regard to "Retention of Title" clauses in conditions of sale and contract;

(6) if he will make a statement and clarify his Department's view in the context of the increasing use by companies of the "Retention of Title" clauses in conditions of sale and contract; and 273W whether his Department considers this will lead to unfair trading practice;

(7) what consideration his Department has given to the effects which the increasing use by companies of the "Retention of Title" clauses in conditions of sale and contract will have on the end year tax positions of those companies which are subject to these clauses in conditions of sale and contract.

§ Mr. Clinton Davis

In several European countries, notably the German Federal Republic and the Netherlands, the sale of goods subject to retention of title clauses is a long-established and widespread practice; the practice is also growing in the United Kingdom.

The spread of retention of title clauses has wide implications, and my officials are engaged in discussions with a number of bodies, including the CBI, which has set up a study group on the subject, the Committee of London Clearing Bankers, and with the professional practitioners in insolvency. The Consultative Committee of Accountancy Bodies issued a guidance statement on 28th September 1976 on accounting for goods sold subject to reservation of title. Attached to that statement was a note by the Inland Revenue on the tax treatment of such transactions. The practice of the nationalised industries with regard to the use of these clauses is a matter for their boards.

The implications of the use of retention of title clauses for the law on insolvency are being considered by the Insolvency Law Review Committee, appointed by the Secretary of State for Trade, under the chairmanship of Mr. Kenneth Cork.

There is some interest in the EEC on this subject, notably in connection with the draft European Bankruptcy Convention and the draft directive on the recognition of securities over moveables, but implementation of these instruments would lead only to a limited degree of harmonisation of the different laws and practices within the EEC governing the use of retention of title clauses.

I understand that the Scottish Law Commission is giving some consideration to this complex question following the publication in August 1976 of its consultative memorandum on corporeal moveables—passing the risk and ownership. 274W Their report will, no doubt, discuss any differences there are between Scots and English law on this matter. I also understand that the Office of Fair Trading has given some consideration to proposals by certain trade associations to recommend to their members the use of retention of title clauses in standard conditions of contract. Further questions on the Scottish legal aspects and the fair trading implications should be addressed to the Ministers concerned.

It is clear from the above that wide-ranging consideration is being given to the effect of the spread of retention of title clauses. It is too early to say what action, if any, it may be appropriate for the Government to take to deal with any problems which may arise due to the growth of this practice.