Sale of motor vehicles on hire-purchase
(Hire Purchase Act 1964, Part III)
If a vehicle which is subject to a hire-purchase (HP)
agreement is sold by the hirer to a private person who
buys in good faith and without notice of the HP agree-
ment, the buyer acquires a good title to the vehicle, even
as against the owner. Motor dealers and finance com-
panies cannot claim the benefit of this provision, so they
will not acquire good title to a vehicle which is already
subject to an HP agreement. It also appears that business
purchasers unconnected with the motor trade may be
prevented from taking advantage of the exception to the
nemo datrule.
Part 3Business transactions
314
Taxation and national insurance
Association Ltdv Jones(1987)
Thieves stole H’s car. H successfully claimed for her loss
under her car insurance policy. The thieves sold the car
to L, who sold it to T, who sold it to A (a dealer), who sold
it to M (a dealer), who finally sold it to Jones. The insurer
sought to recover the car from Jones. The Court of
Appeal held that Jones had not acquired a good title to
the car by virtue of s 25. If a person buys a car from a
thief and then resells it, he is not a seller within the terms
of the section because the transaction with the thief was
not a contract of sale. A resale to a third party in these
circumstances cannot cure a defective title.what had happened it terminated its agreement with T &
T and became entitled to recover seven vehicles of the
cars sold to Rushton. Shortly afterwards T & T went into
liquidation. The Court of Appeal held that Rushton had
bought the cars as a business venture and with a view to
selling them at a profit. Although he was not in business
as a motor dealer and had no intention of becoming a
dealer, he was a trade purchaser and not a private buyer.
He could not claim the protection of Part III of the Hire
Purchase Act and was therefore liable in conversion to
the Bank. Jenking acquired good title to the car he
bought as he was a bona fide purchaser without notice
of the defect in title.G E Capital Bank Ltdv Rushton and
Jenking(2005)
The Bank was a finance house whose business included
providing finance to motor dealers. The Bank entered
into an agreement with T & T Motors under which the
Bank advanced £100,000 to T & T to enable it to buy
cars for its business. The agreement provided that the
Bank retained title in any vehicle until the whole amount
advanced by the Bank in respect of it had been repaid.
T & T’s owner ran short of cash and he approached
Rushton for a loan. Rushton was not willing to lend
money to T & T but he introduced Jenking to T & T’s
owner and, through Jenking’s company, a short-term
loan of £40,000 was agreed secured by a debenture and
repayable on demand. After a few weeks Jenking called
in the loan. It was agreed that T & T would have a short
time to sell its stock and Rushton would buy any cars
remaining. In the event Rushton bought 13 vehicles, one
of which he sold to Jenking. When the Bank realisedThe majority of finance companies are members of
Hire Purchase Information Ltd (HPI). This organisation
maintains a register where finance companies can regis-
ter their HP agreements. When a car dealer is offered a
car for sale, he can check with HPI to see if it is already
subject to an HP agreement.
The provisions of Part III of the Hire Purchase Act
1964 do not apply in circumstances where a rogue has
obtained possession of a car on HP by providing a false
identity and then subsequently sells the car to a private
purchaser for value (see Shogun Finance Ltdv Hudson
(2004), which was discussed in Chapter 7 ).Reform of the law relating to transfer of
title contained in ss 21–26 of the Sale
of Goods Act 1979
The rules relating to transfer of title contained in ss 2l–
26 have been the subject of considerable scrutiny over
the years. In 1966 the Law Reform Committee made
a number of recommendations for reform aimed at sim-
plifying the rules in favour of the innocent purchaser.
The Committee also recommended that the decision in
Rowlandv Divall(1923) should be modified so that the
purchaser’s right of recovery should take into account
any benefit he may have had from the goods while in his
possession. A further recommendation was that a pur-
chaser of goods by normal retail sale or at a public auc-
tion should acquire good title to the goods irrespective
of the seller’s title. The Law Reform Committee’s pro-
posals were not implemented.
The issue was considered again in 1989 by Professor
A L Diamond in his review of security interests in
property (A Review of Security Interests in Property(DTI,