With Faith’s future in doubt its suppliers have tried to reclaim stock from the footwear chain’s stores and concessions. Are their actions legal and the only reasonable recourse?

What is retention of title?

Last week suppliers to shoe chain Faith stormed its head office to try and reclaim stock and threatened to take stock froam stores and its Debenhams concessions under retention of title as the immediate future of the chain became mired in uncertainty.

Retention of Title is part of Section 17 of the Sale of Goods Act. It gives suppliers of goods an advantage over suppliers of services and means if you have not been paid you have the right of entry into retailer’s premises to claim back stock.

When can it be used?

It can be used if there are concerns over a retailer’s solvency and suppliers are not being paid. Suppliers are able to go into warehouses or stores and claim back unpaid for goods.

Suppliers that decide on this route need to make sure they can identify their own product and have documentation of their title rights.

However, if a company then goes into administration the rights of creditors are effectively suspended, says Shoosmiths associate of commercial litigation Robert Syms. “Rights are not lost but suspended so a company has a chance to sort itself out. In an honest business failure a company may be able to start again,” he explains. Negotiations then have to take place with the administrator.

There is also a clause, strangely named ‘equity’s darling’, whereby if stock has been bought by someone else - in an arm’s length transaction - a claim cannot be made.

When have suppliers used it?

It has been used in several cases, a notable example is the collapse of Allders. In this case Levi’s wanted

to get stock out and was eventually allowed to by the administrator.

It is a rarity as old stock has low value and a cash compensation, however small, can often be more favourable.

What can retailers do to stop stock being removed?

You cannot change the rights of suppliers but once a company goes into administration it is the administrator that needs to deal with the creditors and suppliers are not entitled to remove stock.

In the case of a department store if suppliers are trying to clear stock from a concession that they own then they can try to do a deal with a supplier.

Cash compensation would be far more valuable to a supplier than old stock would be, so if a deal can be done it is the best route and will avoid lorries turning up at your loading bay to empty astore’s shelves.

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