In its judgment Rabobank/Reuser of
3 June 2016, the highest court of justice in the Netherlands
(Hoge Raad or Supreme Court)
the purchaser of goods delivered subject to retention of title
may establish a valid pledge on his conditional property right
payment to the seller may cause this conditional property right
to evolve into full ownership rights on such goods after the
as a result of payment to the seller, the pledgee (rather than
the receiver) is entitled to the goods because a valid pledge was
established on the goods concerned.
Until now, it was assumed that a valid pledge could no longer be
established on account of the pledgor having lost his power to
dispose of his property and because the goods formed part of the
Rabobank had established a pledge on goods delivered to Kwekerij
(Revadap) subject to retention of title. At some
point the compulsory winding-up of Revadap was ordered. Rabobank
settled the claim of the supplier that had delivered the goods
subject to retention of title after the court had ordered the
compulsory winding-up. As a result of payment to the supplier, the
retention of title lapsed and Revadap became the owner of the
After the goods had been sold, the receiver subsequently claimed
the proceeds. According to the receiver, Revadap had lost its power
to dispose of its property on account of its insolvency, and the
goods that had initially been delivered subject to retention of
title could no longer be validly pledged to Rabobank following
payment of the purchase price by Rabobank. The receiver therefore
claimed that the goods formed part of the insolvent estate.
Rabobank argued that a valid pledge had been established on the
goods. According to Rabobank, Revadap was the owner of the goods
delivered subject to retention of title on the condition precedent
that the purchase price would be settled. Rabobank claimed that a
valid pledge could be established on this conditional property
right despite the insolvency of Revadap. By settling the
supplier's claim, Rabobank obtained a pledge on such goods.
Allegedly, Revadap's loss of power to dispose of its property
was not an impediment as all acts of transfer were performed before
the court order.
The Supreme Court ruled in favour of Rabobank.
This ruling is very favourable for pledgees (i.e. banks). By
settling the claim of a supplier who delivered subject to retention
of title they can obtain a valid pledge on the full ownership of
the goods concerned. Obviously, this will only be an attractive
option for pledgees if the expected proceeds of the sale are higher
than the supplier's claim, which must be settled first.
Receivers are less happy with the ruling of the Supreme Court;
for once the purchase price is paid, goods delivered subject to
retention of title no longer form part of the insolvent estate.
The content of this article is intended to provide a general
guide to the subject matter. Specialist advice should be sought
about your specific circumstances.
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