Kingsley v Sterling Industrial Securities Ltd
| Jurisdiction | England & Wales |
| Judge | LORD JUSTICE SELLERS |
| Judgment Date | 31 March 1966 |
| Judgment citation (vLex) | [1966] EWCA Civ J0331-2 |
| Date | 31 March 1966 |
| Court | Court of Appeal |
[1966] EWCA Civ J0331-2
In The Supreme Court of Judicature
Court of Appeal
(From: Mr. Justice McNair - London)
Lord Justice Sellers
Lord Justice Harman and
Lord Justice Winn
Mr. STEPHEN TERRELL, Q.C. and Mr. PETER CREIGHTMORE (instructed by Messrs. Victor Mishcon & Co.) appeared on behalf of the Appellants (Defendants).
Mr. ALAN RAWLEY (instructed by Messrs. Malcolm Fraser & Co.) appeared on behalf of the Respondent (Plaintiff).
The defendants, who appeal to this Court, are a hire purchase finance company. They are in close business relationship with A. Saxon Limited, who carry on business as the Saxon Finance Agency and whose trade is that of financing transactions for customers. They do not hold a stock of motor vehicles for sale. In this – in so far as it relates to trans-actions on motor vehicles – their trade differs from the ordinary trade of motor dealers who hold a stock of vehicles which they offer for sale and who frequently take a motor vehicle belonging to a customer in part-exchange for a newly acquired vehicle. If hire purchase terms are desired by the customer, the dealer sells the selected vehicle to a hire purchase company who hire it out to the customer. Such a transaction has to comply with the Hire Purchase Acts and in particular requires a minimum deposit against the agreed price. This deposit or initial payment is customarily made to the dealer either by a cash payment or by a credit for a vehicle taken in part-exchange and it is the balance of the agreed purchase price plus the hire purchase charges which the customer has to pay to the hire purchase company. In this way the customer provides the deposit. The statutory deposit material to the present case was a minimum of 20 per cent, of the price.
There are two other types of transactions in motor vehicles, perhaps less common than those through a motor dealer holding stock for sale. In these two types Saxon are interested. What have been described as "private transactions" arise where an owner of a motor vehicle finds a private buyer B. who wishes to acquire his car but wishes to pay by instalments by a hire purchase agreement. Saxon would finance such a transaction by buying the car from A, and selling it to the defendants, who would hire it out to B. on hire purchase terms, and provision would be made for at least the minimum statutory deposit to be made by B. In such a case B. would acquire possession of a car which was not previously his and the transaction in that respect resembles the ordinary transaction.
The third type, described as "refinancing transactions", arises where A. wishes to raise money on his own motor vehicle but wishes at the same time to retain possession of it and make use of it. The present case falls into that category. If the vehicle owner retains possession of the vehicle and raises money on it by a document transferring the ownership of the vehicle as security for a loan, the transaction would have to be in a prescribed form and registered under the Bills of Sale Acts in order to be effective. It is one of the pitfalls which confront parties to "refinancing transactions". So as to avoid evasion of the Bills of Sale Acts the Court looks behind the apparent bargain to ascertain what the parties truly intended in their transaction.
In Stoneleigh finance Limited. v. Phillips (1965 2 Weekly Law Reports 506) such an investigation took place in a "refinancing transaction". The documents were inappropriate to the transaction and produced, as all the Court held, inaccuracies and artificial statements but the majority of the Court of Appeal upheld them as being a genuine and not a fictitious or sham presentation of the bargain there involved. If parties use documents which are inappropriate to tie transaction in hand and involve statements which are inaccurate, the Court may rightly be sus-picious that the parties are trying to make the transaction appear to be something other than it really is. Mr. Justice McNair took the view in the Stoneleigh case that the documents did not reflect the true transactions but in the present case, no doubt influenced by the majority view in Stoneleigh. the same learned judge has taken the contrary view. I think that must be accepted.
We had much argument from the Bar, not surprisingly distinguishing or applying Stoneleigh as it suited the party but I do not find the comparisons profitable. Stoneleigh is an illustration of how far the Court will go in overlooking inconsistencies and inaccuracies in documents in relation to the bargain they are relied on to establish. The present case has to be looked at onits own facts and on the Court's view of then. The detailed facts of this case are carefully found by the learned judge and fully stated in the judgment of Lord Justice Winn and I do not restate them.
It appears that although Mr. Dobney of Saxon was far from revealing any exact knowledge of the law he at least knew of the pitfalls in a "refinancing transaction". When Mr. Kingsley approached him in order to raise as much money as he could by borrowing it on the car's security and not selling it outright, Mr. Dobney explained that they were not moneylenders and could not arrange it that way. He explained that Saxon could purchase the vehicle and then sell the vehicle to a finance company (they had the defendants in mind) who would hire it back to Mr. Kingsley and that if he entered into the transaction he would lose the title to the vehicle, he would part with it to Saxon and Saxon in turn would sell it to the hire purchase company.
Once that conversation was accepted – as it was by the learned judge – that threw light on the nature of the transaction and I think distinguishes the case of Stoneleigh.
There followed an agreement in writing dated the 13th February, 1964, by which Mr. Kingsley sold to Saxon his Rover 3- litre coupe at a price of £1,848. On the back of the same form Mr. Kingsley signed a printed form requesting Saxon as owners of the Rover 3-litre coupe to arrange to sell the vehicle to Sterling (the appellants) on hire purchase terms for a cash price of £1,850 with their usual charges payable by a first deposit of £600 and by 36 monthly instalments of £43. 11s. 8d. That document was dated the 14th February, 1964, although the evidence was that it was signed on the 13th at the same time as the contract of sale. Clause 4 of the request states that "the hirer" (Mr. Kingsley) "declares that he has inspected, tried and approved the vehicle", a declaration hardly appropriate to the circumstances, as its implication is that he is taking over a vehicle with which he was previously unfamiliar.
After that the plaintiff and Mr. Dobney went to the car andthere was some "by-play", as the judgment describes it, which was to effect a delivery of the car by Mr. Kingsley to Saxon and a re-delivery by Saxon in anticipation of the hire purchase arrangement which was in contemplation. As soon as Sterling had agreed to the transaction Saxon sent to the plaintiff a cheque for £1,248, which wan the purchase price less £600 which was the amount of the "first deposit" which the request document required and which was agreed when both the plaintiff and Saxon signed it.
On the 14th February, 1964, Saxon sold the Rover car to Sterling for £1,850 as "cash price of goods" and the invoice evidencing the sale showed an initial payment of £600 and a balance due of £l,250. This sum of £1,250 Sterling duly paid to Saxon.
Once it was acceptedas I think on the whole rightly accepted – that there had been a genuine sale to Saxon, their position became similar to that of the motor dealer in the ordinary transaction. Saxon owned the car, the plaintiff desired to buy it back on hire purchase terms., this involved an initial payment or a deposit. Saxon, the dealer, required £600 (which was in excess of the statutory minimum of £370) and this Saxon retained and obtained the balance from Sterling, the aire purchase company. Saxon retained the plaintiff's deposit against the price and obtained the hire purchase terms for the plaintiff for the balance only.
The £2 difference does not affect the nature of the transactions. If the transactions had gone through precisely to their tenor Saxon would have paid the plaintiff £1,848 and the plaintiff would immediately have paid back £600 in compliance with the request for hire purchase. The fact that those motions were not actually gone through can make no difference to the transaction. As I see it the deposit become a real or actual payment. It was a credit by Saxon to the plaintiff which went to extinguish the like indebtedness of the plaintiff to Saxon.
It might have been unreal or fictitious if the price of thecar, fixed at £1,848, had been much greater than its value. But on the evidence £1,848 was a fair and reasonable value and Mr. Kingsley had to forgo or put up £600 of the £1,848 in order to buy his car back. The £600 was a real loss to the plaintiff because he had paid some £12,100 for the car three months earlier and the car was worth the £1,848. He had the money in the value of the car and the transaction was in no sense one where a man acquired a car when he had nothing with which to acquire it and was unable to find the deposit.
On the 17th February, 1964, the plaintiff and Sterling entered into the hire purchase agreement in a common form on the terms which had been stated in the plaintiff's request to Saxon. It showed the £600 "initial payment paid before signing agreement" (which Saxon had retained and therefore reduced the balance of the purchase price of £.1,850 due from Sterling to Saxon to £1,250). Saxon received from Sterling £1,250 and that sum, together with charges of £319, a total of £1,569, had to be repaid by the plaintiff.
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