It is surely a moment that every printer dreads. A text, phone call or email containing the panic-inducing news that a major client has, without warning, called in the administrators. A quick check of the outstanding invoices confirms the worst-case scenario: the latest job has been printed and delivered, and no payment has been received. Chances are, when the administrator considers your claim, the most you’ll be rewarded with for your hard work is just a few pence in the pound, if that.

However, as Freeth Cartwright partner Philippa Dempster says (see Opinion), if you have a Reservation of Title (ROT) clause in place, legal ownership of the work remains with the supplier until payment has been received. This means you can at least recover the materials or, better yet, if the administrator is seeking a going concern sale and wants to retain the goods for marketing purposes, then an ROT clause will put the printer in a strong bargaining position when it comes to getting payment.

While an unsecured creditor will have to wait for its money, which will be a pittance in comparison to what it is owed, if you have the correct terms and conditions in place and the administrator needs the printed matter, you can force them to pay for the work and can get your money swiftly and potentially in full.

Burden of proof
However, to put yourself in the strongest possible bargaining position, there are a few guidelines that need to be adhered to.

According to Kevin Lucas, partner at insolvency practitioner BCR, if a properly drafted ROT clause is in place, the administrator has no choice but to allow a company to take back its work as long as it can prove ownership. However, he adds: "One thing people fall down on is proof. If you think about paper, unless it has a specific watermark there’s a risk that you won’t be able to prove it is yours and the administrator won’t let it go without proof."

For printers it is easier to prove that work is yours; if you have an invoice for a specific job, a batch of leaflets or books, it is obvious which lot belongs to you. However, to ensure that it is your right to keep the work you have to make sure that the correct retention has been provided. According to Lucas, many people rely on post-contractual claims, usually made on the invoice. However, Lucas says that this is not enough and says that administrators frequently win against claims made on this basis.

He says: "If you want to be absolutely sure, the ROT has to be laid out in the terms and conditions before the work is carried out. You want to make it absolutely clear that you will retain ownership of all work up until the point that it is paid for."

If ownership is proved, it is illegal for the administrator to sell the work on, Lucas says. "If I were to sell it, I could be sued for conversion, which is no different to theft," he explains.

As Dempster says in her comment, a printer won’t necessarily want to get work back, but if you own the work you can barter with the administrator over it. If the work is crucial to the administrator, for example if it intends to continue trading the business, coming to an agreement with the supplier is in the best interests of the creditors. This means the printer could even get full payment for the goods. Lucas says: "You have to look at the bigger picture. If you pay for £100,000 of stock and you think you can sell it for £150,000, that’s an extra £50,000 for the creditors."

One printer that has used ROT is Leeds-based Technoprint. The company was able to recover £25,000 in one instance, almost the full amount, while a second occasion saw it insist on two batches of work, valued by managing director Mark Snee at around £35,000, being returned.

Terms tussle
Snee reiterates Lucas’s point that it is crucial to have terms and conditions in place beforehand, but he adds that it’s not always that straightforward.

"You have to have the retention clause in your terms and conditions," he says. "The buyer won’t have them in theirs. It actually comes down to whoever sent the last terms and conditions that determines which ones count. One thing you can do is fax an acknowledgment of an order; as long as they don’t write back, that will ensure that your terms and conditions are in place."

While it may often be too late to make a difference, especially in a world of fast-turnaround print, clearly there are circumstances in which having an ROT clause in place will put a printer in a far stronger position. With margins so fine in the current climate, surely something that allows you to negotiate back half the money you are owed, rather than settle for pennies in the pound has to be worth instigating?

30-SECOND BRIEFING
• A Reservation of Title (ROT) clause allows you to retain title to products that you have printed but which have not been paid for, even if they have left the premises
• ROT comes into play if a customer goes into administration leaving you unpaid
• If ownership can be proven, the administrator is required to return unpaid-for work and materials to the supplier, allowing the supplier to resell it
• A more likely scenario for the printer will be to demand payment from the administrator. If they intend to trade the company in administration and the work is crucial, you can get paid swiftly and in full
• An ROT clause must be in place beforehand; it will not make any difference if it is applied retrospectively, for example on an invoice. The ROT clause must therefore be included in your terms and conditions
• In order to ensure that your terms and conditions take precedence over the customer’s, send a notice of completion. In a dispute, a court will consider the last set of terms received to be most valid