Stoneleigh Finance Ltd v Phillips

JurisdictionEngland & Wales
Judgment Date17 December 1964
Neutral Citation[1964] EWCA Civ J1217-5
Judgment citation (vLex)[1964] EWCA Civ J1217-6
Date17 December 1964
CourtCourt of Appeal
Stoneleigh Finance Limited
Bernard Phillips
Doris J. Westbury and
Trade Services Limited

[1964] EWCA Civ J1217-5


Lord Justice Sellers

Lord Justice Davies and

Lord Justice Russell

In The Supreme Court of Judicature

Court of Appeal

(From Mr. Justice McNair - Middlesex

Mr. R. I. THRELFALL (instructed by Messrs. straker, Holford & Co., London, S. R.13) appeared on behalf of the Appellants


Mr. G. OWEN (Instructed by Messrs. Philip Ross, Elliston & Co.) appeared on behalf of the Respondent (First Defendant).


This is an appeal from a decision of Mr. Justice Mc Nair in favour of the first and only remaining defendant, Mr. Bernard Phillips, the liquidator of Kane Products Limited.


Prior to the 18th March, 1960, Kane Products Limited were admittedly the owners of three Austin motor vans. The company was pressed for money and whet was done, which has been the subject of inquiry in the court below and in the appeal, was undoubtedly done to raise money and case the company's financial stress. Whatever financial relief was obtained was short lived for the company went into compulsory liquidation on 2nd May, 1960. The defendant was appointed liquidator on the 25th May, 1960.


Mr. Phillips in his realisation of the company's assets treated the three vans as belonging to the company and sold them. He was willing to admit claims for the moneys advanced.


The plaintiffs, who appeal from the judgment against them, ere a finance hire-purchase company and they claim that they acquired the three vans and by three hire-purchase agreements dated the 29th March, 1960, let them as owners on hire-purchase terms to Kane Products Limited end therefore the plaintiffs claim damages for the conversion and detinue of the three vehicles.


Kane products Limited received on the 29th March, 1960, the sum of £l,080 in respect of the three vehicles in the circumstances stated below and the question has arisen whether the transactions by which the money was received were valid and unimpeachable or whether they were caught by section 95 of the Companies Act, 1946, and could be treated, as they have been by the liquidator, as void. A kindred question is whether the plaintiffs ever acquired a legal title to the three vans and whether therefore they were in a position to let them to Kane Products Limited and subsequently to maintain this action for their conversion.


One thing is clear, that, in contrast to the usual hire purchase transaction where the hirer wishes to buy goods from a third person, commonly a dealer in the goods concerned, here the three vans which became the subject of the three hire-purchase agreements commenced their relevant history as the vans of Kane Products Limited. The vans were then In that company's possession. They never passed from that company's possession and it was never the intention of the company that they should do so. The company wished to retain and use the vans and at the same time raise money on them. That is what they did.


If the facts establish that the vans were sold outright by Kane products Limited, were acquired by the plaintiffs and 1st back to Kane Products Limited, the transactions would be unimpeachable. If those were genuine transactions the plaintiffs' case would be in full accord with Yorkshire Railway Wagon Co. v. Maclure (1882) 21 Chancery division page 309; Staffordshire motor guarantee Limited v. British Wagon Company (1934 2 King's Bench page 305); and other cases which have followed the decision of the earlier case.


But if the facts do not establish a genuine sale or if documents in form apparently sufficient are an evasion and the real transaction was not a sale but a charge on the vans to secure the loan in each case then the liquidator was entitled to rely on section 95 and this the judgment has found in his favour.


In re Watson ex parts Official Receiver (1890) 25 Queen's Bench Division page 27, was a case where it was held that the transaction was not a sale, which it purported to be, but a loan secured on chattels which remained in the possession of the borrower.


The issue is one of fact.


In its investigation into the facts it is the duty of the court to discover the true nature of the transaction; to see whether the documents are a genuine statement of the intended transaction or are entered into only to clothe the real transaction in a deceptive manner. (see the cases already cited and"" services (1951 1 All England Reports page 185)


It was conceded that the hire purchase agreements and earlier documents between Kane Products Limited and an inter- "" trade Services Limited, were not registered with the Registrar of Companies within 21 days of their creation and therefore, if they fall under the provisions of section 95, they were void against the liquidator.


Section 95 of the Companies Act, 1948, comes into operation where a charge has been created to which the section applies. Under sub-section 2 (c) the section applies to a charge crested or evidenced by an instrument which if executed by an individual would require registration as a bill of sale. The question is was there such a charge.


The plaintiffs through their servant one Gardiner were in business contact with one Slade of Trade Services Limited, In March. 1960, Kane Products Limited approached Slade to obtain a loan on the three vans, whilst they retained the possession and use of them. This was a class of business known as "refinancing", which business Gardiner had told slade that he would net undertake and which slade had agreed not to submit to the plaintiffs. The plaintiffs or Gardiner had been legally advised, it appears, against such transactions because of difficulties which might arise, difficulties no doubt such as the present case reveals.


On the 16th March, 1960, Kane products Limited sent to Trade services three invoices in identical terms except as to figures. The invoice taken for consideration in the Judgment was in these terms): "To: Trade services Ltd., 56 George Street. London, W. l. Date 18. 3.1960. To supplying vehicle as below: make: Austin 5 ton van year 1956. Reg. No.: 680 HMF. Engine No. (blank). Chassis No.: 5/C/CFE/ 3 4637. Cash price: £485; Deposit, if paid, £125. Balance £360". Then there are two certificates, which perhaps I had better read. "I certify that the above vehicle has bean delivered in good to Trade Services Ltd., 56 George Street London, W.1."I/we certify that the title to the above goods rests with we/us and that I we have the right to assign such title also that these goods are free from any lien end or encumbrance, (signed) D. C. Westbury".


Mr. Westbury was a director of Kane Products Limited. Although his company's address appeared at the top above the date, the form was a form of Trade Services Limited appropriate to a transaction where they were sailing their own vehicle to a customer who desired hire-purchase terms from a finance House to whom Trade services would sell the vehicle which the prospective hirer required.


The form might also have been used for "private transactions" where Trade Services Limited were intermediaries between a private seller of a vehicle and a private buyer who desired hire-purchase terms from a finance company. In that case the private buyer would pay a deposit which would go to the seller, probably through the intermediary, and the balance of the price would come from the finance House as it would if a denier were selling his own car, where likewise he would be paid the deposit. In both cases a deposit would be paid and the hirer would be a different person from the seller. Neither of those was the case here.


Kane Products Limited were paid no deposit of £125 or any other sum. There was no cash price of £485 and never was such Intended. The certificate of delivery in good order was false as no delivery took place end none was Intended. The judgment finds that no real sale was intended and with that I agree. Kane Products Limited never intended to sell the vehicle for £360. It was worth more, probably the £485 stated, similarly the other two were worth more than the net figure, probably the £565 and £420 respectively stated. be deposits were paid there either and the balances after deducting the fictitious deposits were £360, £420 and £300 or a total "price" of £1,080 which was the amount Trade Services Ltd. paid to Kane Products Limited on the 29th March, 1960.


On that date Trade services Limited submitted to the plaintiffs three sets of hire-purchase forms in respect of the three vans.


In each form "To be completed by the dealer". Trade Services Limited offered to sell the van described at the price shown and stated "Your intimation, to us of your acceptance of the annexed agreement shall constitute your acceptance of our offer for sale whereby title in the goods shall pass to you", and further, "We warrant that the goods referred to are our sole property unencumbered and that we have the right to sell such goods free from any lien".


The prices shown in each case were respectively £502. 10s. 0d., £585 and £435. Trade Services Limited therefore had added on £17. 10s. 0d., £20 and £15 respectively to the vans and the net "price" thereof after taking the "deposits" into consideration totaled £1,132. 10s. 0d. due from the plaintiffs to Trade services Limited. This sum was paid by the plaintiffs to Trade services Limited on the 2nd April, 1962, as part of a cheque for a larger amount but it appears that Trade Services had been notified of the acceptance on the 29th March before they paid their cheque for £1,080 to Kane products Limited.


There is no evidence that the plaintiffs ever saw the vans or took delivery of them. In each case, to the so-called cash price of goods "less the initial rental paid on or before signing the agreement" (the deposit) were added hiring charges. The...

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