England and Wales Court of Appeal (Civil Division) Decisions

IN THE COURT OF APPEAL (CIVIL DIVISION)
ON APPEAL FROM READING COUNTY COURT
(Recorder Critchlow)

		The Royal Courts of Justice The Strand London WC2A Friday 15 June 2001

Friday 15 June 2001

1. LORD JUSTICE DYSON: This is a case about title to a Bentley motorcar. Mr Walton bought the car from Rolls Royce in 1989 for £83,500. He had borrowed £75,000 from a finance company, IHF Ltd, and entered into a hire purchase agreement with that company. He sold it on to Mr Brice in about January 1996. Mr Brice did some work on the car before selling it on to Mr Walker. Finally, MrWalker sold it to Mr Freeman in February 1996.
2. The finance company started proceedings against Mr Freeman claiming possession of the car, presumably on the ground that there had been a default in making the payments due under the hire purchase agreement. On 16 February 1998, Mr Freeman consented to a judgment ordering him to return the car to IHF. This was done on the advice of counsel at the door of the court. At paragraph 21 of his witness statement made in the current proceedings, Mr Freeman says that he asked his counsel whether he had any defence by reason of the Hire Purchase Act. Counsel said that the car had gone through too many hands, and he felt that Mr Freeman would not succeed. For reasons that will appear shortly, this was incorrect advice. It is right to record at this stage that no-one has ever suggested that Mr Freeman was other than an innocent purchaser for value of the car.
3. It was in these circumstances that he started the present proceedings, in which he sought as against Mr Walker the return of the purchase price that he paid and/or or damages for breach of condition and/or misrepresentation of title to the car when he sold it. Mr Walker served a third party notice against Mr Brice claiming an indemnity or contribution in respect of Mr Freeman's claim on the ground of breach of condition as to title in the contract of sale between Mr Walker and Mr Brice. In his turn, Mr Brice served a fourth party notice on Mr Walton claiming an indemnity or contribution in respect of Mr Walker's claim on the ground of breach of condition as to title in the contract of sale between Mr Brice and Mr Walton.
4. The trial in the present proceedings started on 24 February 2000. The evidence and submissions were completed on 25 February. Judgment was given on 9 March. On 25 February Mr Freeman, Mr Walker and Mr Brice settled the proceedings as between themselves. A consent judgment was entered by which Mr Freeman recovered £49,000 plus costs against Mr Walker, and Mr Walker was awarded £49,000 plus costs against Mr Brice. That left outstanding Mr Brice's claim against Mr Walton. The judge awarded Mr Brice £42,425 plus Mr Brice's costs against Mr Walton. Those costs included the costs payable by Mr Brice in respect of the claim by Mr Freeman against Mr Walton.
5. It is against this judgment in favour of Mr Brice that, with the permission of Kay LJ, Mr Walton now appeals. Mr Walton was unrepresented before the judge. Mr Brice was represented by counsel. At pages 5 and 6 of his judgment, the judge identified the issues that were raised before him. First and foremost was whether Mr Walton was the seller of the car to Mr Brice. Mr Walton contended that in making the contract of sale to Mr Brice he was acting on behalf of a company called Chesway Ltd. The judge considered all the evidence that bore on that issue, and decided that Mr Walton was the seller of the car. The other issues went to quantum only. The trial proceeded on the basis of an acceptance that Mr Freeman had been liable to IHF, with the consequence that Mr Walker was liable to Mr Freeman and Mr Brice to Mr Walker.
6. The sole ground of appeal is that Mr Freeman had not been liable to IHF since, by reason of section 27(3) of the Hire Purchase Act 1964, Mr Freeman had good title to the car, and had a complete defence to IHF's claim to its return. Section 27, so far as material provides:

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

(3) Where the person to whom the disposition referred to in subsection (1) above ('the original purchaser') is a trade or finance purchaser, then if the person who is the first private purchaser of the motor vehicle after that disposition (the 'first private purchaser') is a purchaser of the vehicle in good faith without notice of the relevant agreement, the disposition of the vehicle to the first private purchaser shall have effect as if the title of the creditor to the vehicle had been vested in the debtor immediately before he disposed of it to the original purchaser."

7. It is clear that section 27(1) was satisfied. Mr Walton disposed of the car to Mr Brice before property in the car had become vested in him (Mr Walton). He continued to be the debtor under the hire purchase agreement because (as the judge found) there were still sums outstanding under the agreement.
8. The next question is whether section 27(3) applied on the facts of this case. There is no doubt that Mr Walton, Mr Brice and Mr Walker were all trade purchasers. At page 1 of his judgment the judge said this:

"The case as summarised in the claimant's skeleton, Mr Freeman's skeleton argument, is about a Bentley motor car, and counsel who drafted that skeleton argument said that Mr Freeman fell in among car dealers, suggesting something of a pejorative nature. It seems to me, having heard evidence in this case, that that is a highly appropriate way to summarise what in fact happened to Mr Freeman because Mr Walker, in my judgment, was dealing in cars at the time and it is not in dispute that Mr Brice was a car dealer of some 30 years' experience and also Mr Walton, through family companies and otherwise, has been involved in the motor trade business for many many years."

9. The final question is whether Mr Freeman was a private purchaser. If he was, he was clearly the first such purchaser since he had bought the car from Mr Walker. Moreover, he bought the car in good faith without notice of the hire purchase agreement. It is true that the judge did not expressly find that Mr Freeman was a private purchaser, but there is no evidence in the papers whatsoever that he was a trade purchaser, and the passage from the judgment I have just cited implies that he was not in the trade.
10. It follows that, in my judgment, this appeal must succeed. The premise that underpinned the whole of this litigation was that Mr Freeman had a good claim against Mr Walker, which Mr Walker reasonably settled on the terms I have mentioned, and the same (the necessary changes being made) as regards the claim by Mr Walker against Mr Brice. It follows that Mr Walker should not have settled with Mr Freeman, nor Mr Brice with Mr Walker. They were not reasonable settlements because the defendants to those claims had no liability to those who made them.
11. It seems unlikely that section 27(3) was drawn to the attention of the judge. He did not refer to it in his judgment, and the issue encompassed by that statutory provision is not mentioned in the list of issues given by the judge at page 5.
12. At all events, for the reasons that I have given this appeal must be allowed.
13. MR JUSTICE WALL: I agree.
ORDER: Appeal allowed and the judgment below to be set aside. The order for costs below to be set aside and no order for the costs below substituted. No order as to the costs of the appeal. (Order not part of approved judgment)