England and Wales Court of Appeal (Civil Division) Decisions

IN THE SUPREME COURT OF JUDICATURE
IN THE COURT OF APPEAL (CIVIL DIVISION)
ON APPEAL FROM THE QUEEN'S BENCH DIVISION
(Deputy Judge Christopher Purchas QC)

		Royal Courts of Justice Strand London WC2 Tuesday, 20th February 2001

Tuesday, 20th February 2001

1. LORD JUSTICE PETER GIBSON: Mummery LJ will give the first judgment.
2. LORD JUSTICE MUMMERY: This appeal raises a question on the application of section 27 of the Hire Purchase Act 1964 ("the 1964 Act"), as substituted by paragraph 22 Schedule 4 to the Consumer Credit Act 1974. The material parts of section 27 provide as follows:

"(1)This section applies where a motor vehicle has been ... agreed to be sold under a conditional sale agreement ... and, at a time before the property in the vehicle has become vested in the debtor, he disposes of the vehicle to another person.

(2)Where the disposition ... is to a private purchaser, and he is a purchaser of the motor vehicle in good faith, without notice of ... the conditional sale agreement ... that disposition shall have effect as if the creditor's title to the vehicle has been vested in the debtor immediately before that disposition."

3. I turn to the facts of this case.
4. On 22nd February 1995 Mrs Rowley took delivery of a Toyota Supra vehicle, registration M270 JW, from Hylton's Garage in Wolverhampton. The agreed purchase price was £37,500. Mrs Rowley made a part payment in the sum of £15,000. The balance of £22,500 was to be provided on hire-purchase terms by the appellant, General Guarantee Corporation, a finance company. When she first sought finance from General Guarantee in December 1994 Mrs Rowley had described herself as a director of the company called Armitage Building Construction Ltd. General Guarantee carried out the usual searches and approved her application for finance in general terms. By a letter dated 10th February 1995, Mrs Rowley confirmed that the vehicle she was to acquire was required by her for private purposes and that the proposed finance agreement was not being entered into by her for the purposes of or in the course of a trade or business.
5. On 22nd February 1995 Mrs Rowley signed a printed form agreement, which has been described in this case as a lease purchase agreement. Her signature was witnessed by a Mr CJ Franklin, an employee of Hyltons. On the same day Mr Franklin, of Hyltons, prepared a typed invoice dated 22nd February, bearing his initials as the relevant salesman. The invoice contained customer details of Mrs Rowley, finance company details of General Guarantee and vehicle details of the Toyota Supra vehicle. It also contained details of the make-up of the purchase price and the VAT. The invoice, which was sent by Mr Franklin to General Guarantee, stated at the foot of the calculations of the price and VAT: "Amount due from finance Co. £22,500". It also recorded the payments which had been made or were due from the customer, Mrs Rowley, amounting to a total of £15,000.
6. I return to the printed lease purchase agreement which was signed by Mrs Rowley.
7. In the agreement she is defined as "the customer" and General Guarantee is defined as "the owner". On the front page of the printed document there is a schedule which on the left-hand side describes the goods and on the right-hand side gives the financial particulars. It includes, in particular, the amount of the monthly rental payments to be made. They are in the sum of £590.63. It is also stated that the first monthly rental payment was to be made on 28th March 1995.
8. On the second page there is a box for signatures. On the right-hand side there is a line for signature by or on behalf of the customer, and that, in this case, is witnessed on the left-hand side by Mr Franklin's signature. Below that, there is a line for the insertion of the signature on behalf of General Guarantee. Following their name are the words "accepting this agreement". There is then a line for the signature and the date to be inserted.
9. There are then the printed terms and conditions of the lease purchase agreement. Those relevant to the arguments on this appeal are contained in clause 1 and clause 10. Clause 1, "AGREEMENT FOR HIRE", provides:

"(a)The hiring of the goods described in the Schedule hereto (`the Goods', which expression shall include all accessories and all additions and renewals made to the Goods) shall commence on and with effect from the date of acceptance of this Agreement by the Owner and (save as hereinafter provided) shall continue for the whole of the period specified in the Schedule hereto.

(b)The Owner hereby appoints the Customer to be its agent to receive delivery of the Goods from the dealer or supplier and to inspect and to accept or reject the same. Unless the Customer shall have given to the Owner written notice of any defect, shortage or other objection to any of the Goods within 48 hours of delivery, it shall be presumed as between the Customer and the Owner that the Goods were properly and timely delivered in good repair and satisfactory order and that they have been duly accepted by the Customer and shall be subject to all the terms and conditions of the hiring thereof.

(c)The Customer's rights but not its liabilities under this Agreement shall not come into force unless and until the Customer has paid the initial Deposit specified in the Schedule hereto."

10. Reference was also made in argument to clause 10: "FORBEARANCE AND AGENCY". That provides:

"No forbearance, indulgence or relaxation on the part of the Owner shown or granted to the Customer in respect of any of the provisions of this Agreement shall in any way affect, diminish, restrict or prejudice the rights or powers of the Owner under this Agreement or operate as or be deemed to be a waiver of any breach of the Terms and Conditions of this Agreement on the part of the Customer. Any supplier, dealer or other person not in the actual employ of the Owner by or through whom this transaction may have been introduced, negotiated or conducted is not the agent and has no authority to act as agent of the Owner who shall under no circumstances whatsoever be held liable for any statement, warranty or representation made by such supplier, dealer or other person."

11. The lease purchase agreement, though signed by Mrs Rowley on 22nd February 1995, was not signed on behalf of General Guarantee until 28th February. It was on that date that General Guarantee drew a cheque for £22,500 in favour of Hyltons. The Deputy Judge, from whose decision this appeal is brought by General Guarantee, found that, before releasing the vehicle to Mrs Rowley, Hyltons would have obtained the approval of General Guarantee "in principle", probably over the phone. This, he concluded, also enabled Hyltons to fill in the interest and monthly payment details in the financial particulars space in the agreement. In the view of the judge, the signature on behalf of General Guarantee on 28th February ratified oral approval which had previously been given on behalf of General Guarantee on 22nd February. Events which occurred in the interval, between 22nd and 28th February, have given rise to these proceedings. Those events were as follows.
12. On 22nd February Mrs Rowley sold the vehicle to a Mr Watts. He was a motor trade dealer trading as ABC Motors. He was also registered as the sole director of the company Armitage Building Construction Ltd. Mr Watts then sold the vehicle on the same day to the respondent, Mr Hichens, for £37,500. Mrs Rowley delivered the vehicle to Mr Hichens. The purchase was funded by the sale by Mr Watts, on behalf of Mr Hichens, of three of Mr Hichens' vehicles. The judge found that the proceeds of sale of those vehicles were probably used, in part, to make the payment of £15,000 made by Mrs Rowley to Hyltons.
13. Mr Hichens knew nothing about the lease purchase agreement. He was a private purchaser. He acted in good faith. The vehicle was registered with a new number, 699 5AH, in the name of his wife, as the first registered keeper, on 22nd February.
14. Mrs Rowley did not keep up the monthly repayments of £509.63 as specified in the lease purchase agreement. It appears that the payments which were made had been funded by Mr Watts. On 30th July 1996 General Guarantee made a demand for the return of the vehicle. On 2nd August 1996 they gave notice terminating the lease purchase agreement. On 26th February 1997 the vehicle was repossessed on behalf of General Guarantee from a car park near the High Street in Aylesbury. On 27th February 1997 Mr Hichens started these proceedings, claiming a declaration that he is the owner of the vehicle. On 5th March 1997 he obtained a court order for the restoration of the vehicle to him.
15. The trial of the action came before Mr Christopher Purchas QC, sitting as a Deputy High Court Judge in the Queen's Bench Division. He held in his judgment given on 18th August 2000 that Mr Hichens had acquired title to the vehicle, and he awarded him the sum of £350 damages. It is against that order that General Guarantee now appeal with the permission of this court.
16. In his judgment, the Deputy Judge held that Mrs Rowley had acted as the nominee or agent of Mr Watts. She remained personally liable to General Guarantee under the terms of the lease purchase agreement. Mr Watts was also liable to General Guarantee under that agreement as undisclosed principal. The judge concluded that the lease purchase agreement had come into effect on 22nd February 1995, when it was orally approved "in principle" by General Guarantee and the vehicle was allowed to be released to Mrs Rowley. The judge went on to hold that the signing of the agreement on behalf of General Guarantee on 28th February signified their formal approval to what had in fact already been agreed.
17. The judge concluded that the requirements of section 27(1) and (2) of the 1964 Act were made out. He said that Mrs Rowley and Mr Watts were bailees and debtors under the lease purchase agreement. Before the property had vested in either of them the vehicle had been disposed of by Mr Watts to Mr Hichens. Mr Hichens was, as I have already indicated, a private purchaser acting in good faith and without notice of the lease purchase agreement. The sale to Mr Hichens, accordingly, took effect as if General Guarantee's title to the vehicle was vested in Mr Watts immediately before the sale by him to Mr Hichens, who thereby acquired a good title.
18. The critical question before the judge (and on this appeal) is whether the vehicle was "agreed to be sold under a conditional sale agreement as at 22nd February 1995". If it was, then section 27 applies. Mrs Rowley disposed of it on that day and Mr Watts disposed of it on that day; and that was before the property in it had either become vested in Mrs Rowley or Mr Watts. The disposition was made to Mr Hichens, who was a private purchaser acting good faith without notice of the agreement; and the disposition would accordingly take effect as if General Guarantee's title to the vehicle had been vested in Mr Watts or Mrs Rowley immediately before the disposition.
19. On behalf of General Guarantee Mr Lamb QC challenged the correctness of this analysis. He submitted that the Deputy Judge had erred in holding that section 27 applied to this case. He made the following points:

1. He submitted the vehicle was not agreed to be sold under the lease purchase agreement until that document was signed on behalf of General Guarantee on 28th February 1995. That was the date of acceptance of the lease purchase agreement by them. The ownership of the vehicle was not transferred to them until they accepted the agreement. Only then had they drawn a cheque in favour of Hyltons for the balance of the purchase price. The disposition was then completed; and only then did General Guarantee bail the vehicle to Mrs Rowley.

2.It was a clear term of the lease purchase agreement that it would not be concluded before there was a written acceptance by signature on behalf of General Guarantee. Mr Lamb submitted that this was a case of a prescribed mode of acceptance. He relied on the wording below the line for the signature on behalf of General Guarantee and on the printed terms which I have quoted in clause 1(a) and (b). He also relied on clause 10 to demonstrate that Hyltons had no authority to act as General Guarantee's agent in respect of the making of the agreement with Mrs Rowley for the release of the vehicle to her.

3.He submitted that it was not open to the judge in the face of these express provisions to infer the making of an oral agreement solely from the fact that Hyltons had released the vehicle to Mrs Rowley on 22nd February. Mr Hichens' case had been pleaded solely on the basis of the lease purchase agreement entered into by General Guarantee on 28th February. It was only then, Mr Lamb submitted, that the 48-hour period referred to in clause 1 would begin to run. It was from that date, and not from 22nd February, that the date for the payment of the first monthly instalment was ascertained and specified in the agreement. He pointed out that no prior oral agreement had been pleaded. It had not been pleaded because the ownership of the vehicle had only passed to General Guarantee on 28th February, when the balance of the purchase price was paid by them to Hyltons. No evidence had been called from Hyltons, or from Mrs Rowley, to prove that a prior oral agreement had been made on 22nd February.

4.Mr Lamb submitted that before 28th February there was no completed agreement for sale under the lease agreement. The deputy judge, he pointed out, had referred to an agreement "in principle". But Hyltons had remained owners of the vehicle and there had been no transfer of ownership in the vehicle by Hyltons to General Guarantee "in principle".

20. On Mr Lamb's analysis Hyltons had made a "preliminary bailment" of the vehicle to Mrs Rowley. It had not been bailed to her under the lease purchase agreement, because that agreement had not been accepted on 22nd February by signature on behalf of General Guarantee.
21. In support of his case Mr Lamb cited three authorities for the proposition that his analysis accorded with the conventional analysis of the contractual situation affecting dealers, finance companies and customers in hire-purchase cases. He contended that the Deputy Judge had erred in departing from the conventional analysis when he had heard no evidence from the dealer, the finance company or the customer which would justify that departure. The first case is a decision of this court, Financings Ltd v Stimson [1962] 1 WLR 1184. In that case it is important to note that the terms of the hire-purchase agreement expressly provided in clause 13, which is set out on page 1185 of the report, that:

"This agreement shall become binding on the owner only upon acceptance by signature on behalf of the owner and the hiring shall be deemed to commence on such date of acceptance".

22. Lord Denning, Master of the Rolls, held that the effect of that wording was that the hire-purchase agreement was not concluded until it was signed. It had not been signed until after the hirer had been allowed by the dealer to take away the car. The hirer had then revoked the offer by returning the car to the dealer, saying he did not want it after all, and the car had then been stolen from the dealer's premises and damaged. All this occurred before the finance company had signed the agreement.
23. At page 1189, Lord Denning rejected the contention that there was a bailment on the terms of the hire-purchase agreement. He said that, as the hire-purchase agreement had never been concluded before these events occurred, there had been no bailment on the terms of the hire-purchase agreement. In his concurring judgment at page 1191, Donovan LJ described that as a case where all that had happened was that the proposed hire-purchaser had been allowed to possess the car in advance of the hire-purchase contract. He rejected the contention that there was a prior separate oral contract embodying practically all of the terms of the proposed hire-purchase agreement. He held there had been a bailment by the dealer, which ceased when the car had been returned to the dealer and the hirer had told him that he did not want it after all.
24. The bailment was described by Pearson LJ in his dissenting judgment at page 1192 as "only a preliminary bailment", in the sense that there was a delivery to the hire-purchaser at a time when no hire-purchase agreement had come into force. That was what he described as a provisional situation, created in anticipation of the hire-purchase agreement being concluded.
25. On the authority of this case, Mr Lamb submitted that this was also a case of a "preliminary bailment" of the vehicle by the dealer, Hyltons, in anticipation of the conclusion of the lease purchase agreement when it was later signed on behalf of General Guarantee. It was not, he submitted, a bailment by General Guarantee under the lease purchase agreement, because it had not been signed at the date of the release of the vehicle to Mrs Rowley or at the time of the dealings with it later the same day, including the acquisition of it by Mr Hichens.
26. The second case is Mercantile Credit Company Ltd v Hamblin [1965] 2 QB 242, another decision of this court. Mr Lamb relied on a passage in the judgment of Pearson LJ at page 269, B to F, which has since been approved by the House of Lords in Branwhite v Worcestor Works Finance Ltd [1969] 1 AC 552. In the House of Lords, Pearson LJ's analysis, which I shall read, was approved by Lord Morris of Borth-y-Gest at 573, C to F, and by Lord Upjohn at 576, A to C. In his judgment Pearson LJ said this:

"There is no rule of law that in a hire-purchase transaction the dealer never is, or always is, acting as agent for the finance company or as agent for the customer. In a typical hire-purchase transaction the dealer is a party in his own right, selling his car to the finance company, and he is acting primarily on his own behalf and not as general agent for either of the other two parties. There is no need to attribute to him an agency in order to account for his participation in the transaction. Nevertheless, the dealer is to some extent an intermediary between the customer and the finance company, and he may well have in a particular case some ad hoc agencies to do particular things on behalf of one or the other or it may be both of those two parties. For instance, if the car is delivered by the dealer to the customer after the hire-purchase agreement has been concluded, the dealer must be making delivery as an agent of the finance company. If delivery is made before the hire-purchase agreement has been concluded, there is a preliminary bailment, and there may be a debatable question whether the dealer as bailor is acting on his own behalf or on behalf of the finance company, but there is no need to pursue that question here. On the other side of the transaction, the customer may authorise the dealer to complete the forms by filling in the particulars and to present the completed forms to the hire-purchase company. If that is done, an ad hoc agency is created."

27. With that illuminating passage in mind, Mr Lamb submitted that in this case there was a preliminary bailment of the vehicle by Hyltons on 22nd February, and that was before the hire-purchase agreement was concluded on 28th February. At the time of that preliminary bailment Hyltons still owned the vehicle. They were acting as bailors on their own behalf. They were not acting as agents of General Guarantee. So section 27 of the 1964 Act could not apply.
28. In my judgment, the difficulty with General Guarantee's submissions is that the Deputy Judge found an important fact, which was that General Guarantee had orally accepted the lease purchase agreement on 22nd February. It was held by this court in Carlyle Finance Ltd v Pallas Industrial Finance [1999] Road Traffic Reports 281, a case which was not cited to the Deputy Judge, that ordinary contractual principles apply in cases where the express terms of the formal written hire-purchase agreement do not preclude effective informal acceptance by the offeree orally, such as over the phone, or by contact prior to formal acceptance of the offer by signature of the hire-purchase agreement on behalf of the finance company: see, in particular, the judgment of Potter LJ (which was concurred in by Thorpe LJ) at page 296 A to E. Mr Lamb accepted that it was legally possible for a court to depart from what he described as the conventional analysis, such as is to be found in the Stimson case, and to find on the facts of a particular case that an oral acceptance by a finance company creates a binding contact in advance of the formal signature on the hire-purchase agreement. But he sought to distinguish the case of Carlyle on a number of grounds.
29. In examining the judgment in detail, he pointed out that there were more indicia in that case of a prior oral agreement than the mere transfer of possession of the vehicle by the dealer to the customer, which he contended was the basis on which the Deputy Judge in this case inferred the oral agreement of the finance company, General Guarantee. He contended that it was the evidence in that case which had justified the court treating it differently from the conventional case. He pointed out that there was evidence of payment by the finance company on the date when possession of the car was taken by the customer. There was also oral evidence of direct contact between the finance company and the customer, which was absent in this case.
30. He forcefully argued that an important distinction was that there was in this case, as in Stimson, a prescribed mode of acceptance expressly contained in the lease purchase agreement; and that prescribed mode of acceptance required a written signature on behalf of General Guarantee before they were bound by the lease purchase agreement.
31. I disagree. In my judgment it was open to the Deputy Judge to infer from the available materials that, on the balance of probabilities, there was an oral acceptance by General Guarantee on 22nd February of the offer by Mrs Rowley. She had been in contact with General Guarantee since the end of the previous year about obtaining finance from them. General Guarantee had made the usual inquiries about her. They had granted approval to a transaction with her in general terms. She had signed the agreement and paid £15,000 towards the purchase price on 22nd February. An invoice had been prepared by Hyltons showing that the amount of £22,500 was due from General Guarantee to Hyltons. It was in those circumstances that Hyltons released the vehicle to Mrs Rowley. There was no documentary or oral evidence of any further contact between General Guarantee, Mrs Rowley or Hyltons in the intervening period from 22nd to 28th February, when General Guarantee signed the agreement and sent the cheque for the balance of the purchase price to Hyltons.
32. In those circumstances, the Deputy Judge was entitled to hold, on the application of ordinary contractual principles of offer and acceptance referred to by Potter LJ in his judgment in Carlyle, that there was a concluded and binding contract made on 22nd February in the terms of the written lease purchase agreement signed by Mrs Rowley. I am also of the view that this result is more consistent than that proposed by Mr Lamb with the business sense of the conduct of those involved. It would make no commercial sense at all for Hyltons to have parted with possession of the vehicle to Mrs Rowley when they had only received from her a part of the purchase price, without having first been assured by General Guarantee that they would pay the balance of the purchase price pursuant to the terms of the lease purchase agreement.
33. The consequence is that, in my view, the Deputy Judge was right in holding that the ownership of the vehicle passed on 22nd February from Hyltons to General Guarantee and that the vehicle was then bailed by Hyltons, as agent of the owner, General Guarantee, to Mrs Rowley on the terms of the lease purchase agreement.
34. I conclude, like the Deputy Judge, that the requirements of section 27 have been satisfied. Mr Hichens is entitled to rely on that section to establish a good title to the vehicle.
35. I would dismiss this appeal.

36. LORD JUSTICE RIX: I agree. There was evidence before the Deputy Judge both in the form of Hyltons' invoice dated 22 February 1995 and in the form of the defendant's letter before action dated 30 July 1996 that the contract under which the car was sold to the defendant by Hyltons had already been made on 22 February 1995, before delivery of the car to Mrs Rowley. That evidence supports the commercial realities spoken to by the Deputy Judge, which are that the dealer, Hyltons, would not be willing to trust Mrs Rowley with the car unless it could rely upon a covenant of the defendant for payment of the balance of £22,500 of the purchase price still outstanding at the time of delivery.

36. There was also evidence before the Deputy Judge that the defendants had been in direct contact with Mrs Rowley, at any rate by correspondence, and that it had carried out its usual searches and approved her application in general terms before 22 February. In these circumstances it seems to me that the inference of the Deputy Judge that the lease purchase agreement had already been orally and validly accepted on the telephone by the defendant on 22 February was entirely justified and, thus, that factually this case is on all fours with Carlyle Finance Ltd v Pallas Industrial Finance (1999) RTR 281.
37. In one respect, however, this case is even stronger than Carlyle in that there the finance company's form of hire-purchase agreement provided that property should not pass to it until its signature of the conditional sale agreement, albeit reliance was not placed on such "paperwork" (see at 292A). In the present case, however, the defendant's lease purchase agreement contains no terms stipulating that its acceptance could only be made in writing under the defendant's signature. It merely provided by clause 1(a) that it was to "commence on and with effect from the date of acceptance" by the defendant. It is true that the signature box contained the printed words "signature on behalf of General Guarantee Corporation Ltd accepting this agreement", but that was not a term of the agreement, nor did those words, or any other term, provide that acceptance could not be made in any other way. It is also true that a regulated agreement under the Consumer Credit Act 1974 will not be properly executed unless it is signed on behalf of the creditor or owner (see section 61(1)(a)). But that does not mean that an improperly executed agreement is not an agreement which has been made, only that it is not enforceable against the debtor or hirer without an order of the court (see section 65(1)).
38. I agree that this appeal should be dismissed.
39. LORD JUSTICE PETER GIBSON: I agree with both judgments.
Order: Appeal dismissed with costs. (ORDER DOES NOT FORM PART OF APPROVED JUDGMENT)