NOTES OF CASES
| Published date | 01 January 1977 |
| Date | 01 January 1977 |
| DOI | http://doi.org/10.1111/j.1468-2230.1977.tb01489.x |
NOTES
OF
CASES
WRONGFUL SALE
OF
HIRE-PURCHASE CARS
THE
motorcar seems to
be
a chattel which is particularly prone to
being wrongfully sold while it
is
subject to
a
hire-purchase agree
ment.l
In
1938
the major finance companies
set
up an organisation
called Hire Purchase Information Ltd. (HPI) in order
to
make the
wrongful sale of hire-purchase cars more difficult. When
a
finance
company which is a member of HPI lets a
car
on hire-purchase they
send a record of the description of the
car
and its registration number
to HPI. Anybody who is contemplating buying a second-hand
car
can
ask HPI
if
they have a record of any hire-purchase transaction re-
lating to the vehicle. Dealers who are &kited to HPI
are
entitled
to
contact the organisation directly to ask for information. Other
persons must make their inquiries through one of the motoring
organisations or through a citizen's advice bureau. The finance com-
panies which are members of HPI are involved in about
98
per cent.
of vehicle hire-purchase transactions.
In
1964,
mindful
of
the fact that private purchasers, unlike trade
purchsasers, tended not to check with HPI before buying cars,
Parliament enacted that where a private purchaser bought a car which
was subject to a hire-purchase agreement he would get
a
good
title
to
the car unless he had actual notice of the hire-purchase agree-
ment.2 For traders no such statutory protection was provided. HPI
provides a good practical protection to trade purchasers but it is
possible for
a
careful trader who consults HPI before buying a car
to find that the car is subject to a hire-purchase agreement about
which HPI did not inform
him.
This could happen because the car
is
owned by one
of
the minor
finance companies who are not members
of
HPI; or bemuse of some
breakdown in the communications between the hance company,
HPI and the trader. In such a situation does the trader have any
defence to
an
action for conversion by the
6nance
company?
Unless he was fortunate enough to have bought the vehicle in
market overt or from a mercantile agent acting in the course
of
his
business as
a
mercantile agent? the trader
is
unlikely to have any
defence. From time to time unfortunate traders have attempted to
pursuade the courts that finance companies should be estopped from
asserting their titles? Although the courts have always accepted that
there is room for estoppel to operate in such cases, they have typically
been extremely reluctant to apply the d~ctrine.~ The doctrine was
1
A hire-purchaser is unable
to
pass
a
good
title:
Herby
v.
Matthews
118951
2
Hire Purchase Act 1964, Pt.
111.
3
Factors Act 1889,
s.
2.
4
See,
e.g. Eastern Distributors
v.
Goldring
119571
2
Q.B. 600;
Central
Newbury
5
Zbid.
A.C.
471.
Car Auctions Ltd.
v.
Unity Finance Ltd.
[1957]
1
Q.B.
371.
64
Jan.
19771
NOTES
OF
CASES
65
applied by
a
majority of the Court of Appeal in
Moorgute Mercantile
Co.
Ltd.
v.
Twitchings
but the decision was reversed
on
appeal
by
the House of Lords.'
In
Moorgute
the defendant bought a
car
from a dishonest rogue who
had it
on
hire-purchase from the plaintilk The defendant had
con-
tacted HPI who had informed him that they had
no
record of any
transaction concerning the vehicle. The plaintiffs were members of
HPI and it was not established why HPI had no record of the
hire-purchase agreement between the plaintiffs and the dishonest
character. The defendant put forward a three-fold defence
:
estoppel
by representation; estoppel by negligence; a cross-claim in negligence
for damages equal to the damages claimed by the plaintiffs for
conversion.
The majority of the Court of Appeal held that the plaintiffs, by
joining
HPI, had made HPI their agents to speak
on
questions of
whether they had
let
vehicles
on
hire-purchase. This being
so,
a
statement by HPI to the effect that they had no record
of
the car in
question amounted to
a
representation on behalf of the plaintiffs that
they had not let the
car
on hire-purchase. Such
a
statement would,
therefore, estop the plaintiffs from asserting their
title
against the
defendant. In the House
of
Lords four of their Lordships rejected
both of the premises of the majority of the Court
of
Appeal
on
this
point. The statement by HPI was held not to amount to a represent-
ation that the car had not been let on hire purchase; and HPI were
not acting
as
agents for the plaintiffs when dealing with the de-
fendant's request for information. The majority of their Lordships thus
adopted the traditional view of estoppel by representation in such
cases. A man will not be deprived of his property under the doctrine
unless the evidence shows clearly that he represented that he was not
the
When, however, their Lordships considered the other two grounds
of defence they all departed from the traditional view-although, by
a narrow majority, they came to the traditional conclusion.11 The
House
took the view that a defence based on estoppel by negligence
and a counter-claim for damages for negligence to be set off against
the damages claimed by the plaintiffs were substantially the same
thing. The questions to be asked were the same
in
each case. Were the
plaintiffs under a duty of care towards the defendant? Were the
plaintiffs in breach of such duty? Was the
loss
suffered by the de-
fendant
(i.e.
the damages in conversion) a legal consequence of the
breach which was not too remote? The traditional view was that
estoppel by negligence was
in
truth a species of estoppel by represent-
Any lesser representation will not do."
6
r19751
3
W.L.R.
286.
7
ii976j
i
~iiEk-641.
8
Lord
Wilberforce,
Lord Edmund-Davies, Lord Fraser
of
Tullybelton
and Lord
9
See
e.g. Central Newbury
v.
Unity Finance
[
19571
1
Q.B.
371.
Russell
of
Killowen (Lord Salmon dissenting).
10
Ibid.
11
Lord Edmund-Davies, Lord Fraser and Lord Russell.
VOL.
40
(1)
3
66
THE MODERN
LAW
REVIEW
[Vol.
40
ation
so
that, no matter how careless
an
owner had
been,
he would
not be deprived of his property unless
his
carelessness amounted to
nothing less than a clear representation that he was not the owner.
Thus,
in
Central Newbury Car Auctions
Ltd.
v.
Unity Finance
Ltd.la
the
Court
of Appeal
l3
refused to hold that the ownei of a car who
carelessly allowed a rogue to have possession of the registration book
was estopped from suing an innocent purchaser
of
the
car
from the
rogue. A registration book is not a document of title even though it
is generally treated as proof of ownership. Negligently to allow
a
non-
owner possession of the book did not amount to a representation,
therefore, that he was the owner. The majority of the
court
con-
sidered that a breach of
a
duty
of
Care
could only assist the defendant
if
it was sufficient to raise an estoppel by representation.
By
allowing
the possibility
of
a defence based on simple negligence
in
Moorgate,
the House of Lords conferred upon themselves the right
to discuss the policy questions raised by the case as well as straight-
forward factual questions
of
what was represented, by whom it was
represented and the capacity in which they represented it. For when
the courts decide to consider whether to recognise the existence
of
a
duty
o€
care
in
circumstances where one has not previously been
recognised, the question for consideration is essentially one of poli~y.'~
The House ultimately decided by the narrowest of majorities
l5
that
the plaintiffs owed no duty to the defendant to employ reasonable
care to ensure inat the hire-purchase agreement
in
question was
registered by HPI. The House did not, however, decide that a finance
company owes
no
duty
of
care at all to any innocent trade purchaser
such as the defendant. The decision was simply that there is no duty
to register. It may well be, therefore, that the decision in
Central
Newbury
is open to attack.
The policy consideration which swayed the majority of the House
was as follows. Finance companies should be encouraged to join
HPI
in
order to protect innocent purchasers as well as themselves
against the possibility of wrongful sales by dishonest hirers.
To
impose
a duty of care upon companies who
are
members of HPI to ensure
that all their transactions are registered would serve to discourage
companies from joining
and
to encourage member companies to
resign from membership.18 In the
Court
of Appeal, Lord
Denning
had suggested that the
court
could impose a duty of care upon all
finance companies to join HPI and to
see
that all transactions are
registered.17 This was rejected by the majority of the House, although
no real consideration seems to have been given to the suggestion.18
12
[1957] 1
Q.B.
371.
13
Denning L.J. dissenting.
14
See
e.g.
Lord Reid in
Home
Ofice
V.
Dorsel
Yacht CO.
119701
A.C.
1004.
15
See note
11,
supra.
18
See
[1976]
2
All
E.R.
641, 659,
665
and
668.
Lords Fraser and Edmund-Davies
were
also
concerned that the range
of
persons
to
whom the alleged duty would be
owed would be too wide,
see
pp.
659
and
665.
18
[1976]
2
All
E.R.
641, 653, 659, 665, 668.
17
[1975]
3
W.L.R. at p.
299.
To continue reading
Request your trial