VFS Financial Services Ltd v JF Plant Tyres Ltd [2013] EWHC 346 (QB)

Case No 2012 FOLIO 681[2013] EWHC 346 (QB)
IN THE HIGH COURT OF JUSTICE
QUEEN'S BENCH DIVISION
LONDON MERCANTILE COURT
Venue Royal Courts of Justice, Strand, London, WC2A 2LLDate 26/02/2013
Before
HIS HONOUR JUDGE MACKIE QC
Between
VFS FINANCIAL SERVICES LIMITEDClaimantJ F PLANT TYRES LIMITEDDefendant
Mr Turlough Stone (instructed by Shoosmiths LLP) for ClaimantMs Katie Wilkinson (instructed by Wilkin Chapman Grange) for DefendantHearing Hearing dates: 15 February 2013
JudgmentJudge Mackie QC :
[1]This application for summary judgment and, in the result, this action turns on the meaning of ‘dispose of’ in Section 27 of the Hire Purchase Act 1964, a point previously only addressed in an unreported case of which only a partial record is available. I decided the case last Friday and said that, to do justice to the admirable arguments of Counsel I would give more detailed reasons than was possible in the middle of a full list.

Facts

[2]The facts, which are agreed or not much in dispute, are set out in the witness statements and exhibits of the solicitors for the parties and can be summarised as follows.[3]The Claimant let a Volvo FM420 8x4 truck, registration number YT11 KMM, (“the Vehicle”) on hire purchase terms on 13th April 2008 first to a firm, Slingsby Plant Hire (“Slingsby”) and then, by novation, to a related company, Doncaster Aggregates Limited (“Doncaster”). The Claimant terminated the agreement for non-payment of rental instalments on 16th February 2012 and tried to repossess the Vehicle. But it turned out that Doncaster had parted with possession of the Vehicle at the end of December 2011 to the Defendant, which refused to return it to the Claimant.[4]The Defendant asserted that it had title to the Vehicle. The Defendant says that by late 2011, Slingsby owed it some £41,404.80 for goods and services rendered and that Doncaster owed it some £3,960. The Defendant also says that Mr Slingsby offered the Vehicle in settlement of those debts, and the Defendant accepted the offer. Doncaster subsequently issued an ‘invoice’ to the Defendant, purporting to be in respect of the sale of the Vehicle for £89,896.79 (inclusive of VAT).The Claimant then brought this action alleging wrongful detention and conversion. After the action was under way the Vehicle was sold by agreement between the parties and fetched £57,357.62 in August 2012.[5]The Defendant’s defence is that it is entitled it to the protection of Section 27 of the Hire Purchase Act 1964 (“HPA”) as it was an innocent purchaser without notice of the hire purchase agreement between the Claimant and Doncaster. That issue requires a trial with evidence and a date has been fixed. The Claimant argues that it is nonetheless entitled to summary judgment because the taking of the Vehicle by the Defendant in settlement of the debts of Doncaster and Slingsby cannot amount to a ‘disposition’ within the meaning of Section 29 of HPA. It is this point that is in issue in this application. As I see it, despite submissions otherwise from the Defendant, there is sufficient material for me to decide the point with a potential saving of time and costs.

The law

[6]Section 27 HPA provides in relevant part:
“(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. “(2) Where the disposition referred to in subsection (1) above is to a private purchaser, and he is a purchaser of the motor vehicle in good faith without notice of the hire purchase or conditional sale agreement (“the relevant 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.”
[7]It is common ground that Sub-section 27(1) applies as Doncaster was the debtor under a hire purchase agreement with the Claimant.[8]Section 29(1) HPA 1964defines a disposition as :
“any sale or contract of sale (including a conditional sale agreement), any bailment or (in Scotland) any hiring under a hire-purchase agreement and any transfer of the property in goods in pursuance of a provision in that behalf contained in a hire purchase agreement, and includes any transaction purporting to be a disposition (as so defined) and “dispose of” shall be construed accordingly”
[9]I point out that ‘purporting’ relates back to sale, contract of sale, bailment and transfer. It does not broaden the definition to embrace other transactions which are or purport to be outside those specified categories.[10]The meaning of ‘disposition’ was considered by His Honour Judge Astill, sitting as a judge of the High Court, in Royscott Trust v. Burno Daken Ltd & David Ball (1993), unreported, July 9th 1993. There is no transcript of that decision but there is a commentary with extracts from the judgment in I. Davies, Equipment and Motor Vehicle Leasing and Hiring: Law and Practice (1st ed., 1997) at 215. The facts of that case were remarkably similar to those here and I take them from Mr Stone’s skeleton argument. R let a vehicle on hire purchase terms to one E(SS), who passed it to BD in breach of his obligations under the hire purchase agreement. E(SS) drew up an ‘invoice’ stating the value of the car to be a certain sum, X. At the time, E(SS) owed BD substantially more than X for goods supplied. E(SS) had been unable to discharge that debt, and BD therefore took the vehicle in part satisfaction of the debt. The Judge had to consider whether this transaction amounted to a ‘disposition’ for the purposes of s.29 HPA. He said this:
“it appears to me that the consideration for this transaction was not money, albeit a document called an ‘Invoice’ was produced and the value of the vehicle agreed. Rather the consideration was a forbearance to sue for that part of the outstanding debt represented by the vehicle’s value. It was not ‘an exchange for property for money’ and not, therefore, a disposition as defined by section 29 sub-section 1 of the Hire-Purchase Act 1964”
.

Claimant’s submissions

[11]Mr Stone submits that any attempt by the Defendant to argue that there was in this case a ‘disposition’ offends against the proper construction of s.29(1) HPA and well-established authority that taking property in lieu of a debt does not amount to a sale or a contract for sale, and thus cannot constitute a ‘disposition’ or a ‘purported disposition’. There is no definition of ‘sale’ or ‘contract of sale’ in the HPA 1964 but Section 2 of the Sale of Goods Act 1979provides: “A contract of sale of goods is a contract by which the seller transfers or agrees to transfer the property in goods to the buyer for a money consideration, called the price”.[12]He says this encapsulates the common law position:
“Writing before the Act of 1893, Benjamin listed as the essential elements of a contract of sale: parties competent to contract; mutual assent; a thing, the absolute or general property in which is transferred from the seller to the buyer; and a price in money paid or promised.”
Benjamin’s Sale of Goods, 8th ed. (2012) 1-030 to 34. The text makes clear that where any one of these elements is missing, there is no sale at common law or within the meaning of the 1979 Act.[13]Mr Stone also cites a decision of the then Nourse J in Re Westminster Property Group plc [1984] 1 WLR 1117 where after examining a long run of authorities going back to 1894, he held at 1122 that:
“The authorities establish that in legislative usage and in the absence of a special context the word “sale” denotes an exchange of property for cash and not for other property.”
[14]AsBenjaminputs itat 1-034:
“To constitute a sale it is necessary that the consideration for the transfer of the property in the goods should be in money. This may be either paid or promised (i.e. the sale may be for cash or on credit), but if the consideration is something other than money the contract is not, strictly speaking, one of sale in English law. … goods may be exchanged for work done, for the making of another contract, for rent, or for board and lodging, or in return for the extinction of a rightor the abandonment of a claim, or any other valuable non-money consideration.”
As further authority that the taking of property in lieu of a debt does not constitute a sale Mr Stone cites discussion in the decision of Finnemore J in Simpson v. Connolly [1953] 1 WLR 911 and a similar conclusion by the then Upjohn J in Robshaw Brothers Limited v. Mayer [1956] 1 Ch. 125,[15]Mr Stone argues that it is clear that, properly construed, for a ‘disposition’ to fall within the meaning of Section 29, money consideration has to pass from the ‘purchaser’ to the ‘debtor’. Anything less than that will not do. The choice of the word ‘purchaser’ in Section 27 is also suggestive. On the Defendant’s own case, no money passed. There was accordingly no ‘disposition’ from Doncaster to the Defendant.

Defendant’s submissions

[16]Ms Wilkinson for the Defendant submits that the transaction resulting in the transfer of the vehicle to the Defendant satisfies the definition of ‘disposition’. Two separate transactions can be considered to have taken place. First the Defendant provides goods/services to Doncaster Aggregates and an invoice is raised but is unpaid. Secondly Mr. Slingsby sells the vehicle to the Defendant. The sums payable to Mr. Slingsby for the purchase of the vehicle are set off against the debt owed pursuant to the unpaid invoice. It is submitted that this is a ‘disposition’ irrespective of the failure of the two separate transactions to involve the physical transfer of money.[17]The case of Royscott Trust is inconclusive as it offers no reasoned judgment for the decision and confesses to being unsure what was intended by ‘purported disposition’ within the meaning of the Act. The brief extract provided by the Claimant is not binding on, or even persuasive to, the Court. The inclusion of the word ‘purported’ in the section should be given a wide definition to include a variety of transactions substantially the same as sale, contract of sale and hire. Otherwise it has no meaning since most transactions to which the section might apply will in any event be ‘purported’ rather than actual. Decision.[18]The context of Sections 27 and 29 is the perceived need to protect private parties who buy a vehicle in good faith from the usual consequences of the ‘nemo dat’ rule (i.e. that the buyer cannot obtain a better title to a chattel than the seller). ‘Sale’ and ‘contract for sale’ are not defined and are not stated to have the same meaning as in the Sale of Goods Act. It is not therefore simply a question of applying Section 2 of that Act. Nevertheless the concept of sale of a chattel has at common law and in statute long been associated with a money transaction – see for example the extract from Westminster quoted above. In a context where there seems no need to stretch the definition to cover less conventional transactions, and thereby broaden the exception to the nemo dat rule, and given the careful wording of the section – particularly “disposition (as so defined)” – I conclude that ‘disposition’ is limited to the specific types of transaction described in the section where the vehicle is transferred in return for money.[19]There may be scope for argument about how far the Sections cover payment of a genuine price by means other than cash. Part exchange is it seems covered by the section no doubt because there is at least some passing of money and that process is a very common if not usual incident of buying a car. The distinction may become more difficult when the value of the car to be traded in reaches or exceeds the price of the car being acquired – where in Mr Stone’s submissions the transactions would not be protected – but that is not this case. There is no suggestion here that the Vehicle was sold for a price and payment subsequently agreed to be made by set-off of debts. The debts are only half the value of the ‘invoice’. This was some odd barter.[20]Furthermore although the case of Royscott Trustis not fully or officially reported it is a decision of the High Court, the ratio is clear and the facts almost identical to this case. I should not depart from it unless I consider it to be wrong. I consider it to be right.[21]I therefore consider that the answer is clear. There will be judgment for the Claimant.[22]I shall be grateful if, within the next 72 hours, Counsel will let me have any corrections of the usual kind.