There has
been a Court of Appeal decision involving Section 27 of the Hire
Purchase Act 1964, one of the exceptions to the nemo dat quod
non habet principle of English law, that no one can pass
better title to goods than they possess.
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Facts of the case
In Kulkarni vs Manor Credit (Davenham) Ltd
(Manor), Mr Kulkarni ordered a Mercedes from Gwent Fleet
Management Ltd (Gwent). The timeline was as follows:
- 3 March 2008 – order drawn up and Kulkarni
paid Gwent in full. - 11 March – Manor acquired the Mercedes.
Kulkarni obtained an insurance cover note. - 13 March – Gwent entered into a master
assignment agreement with Manor whereby Manor would provide
vehicles to Gwent on hire-purchase terms and Gwent would provide
those vehicles to its customers on sub-hire terms. - 14 March – Manor and Gwent entered into a
three-year hire purchase agreement in relation to the Mercedes. The
Mercedes was delivered to Kulkarni.
Gwent failed to make payment and Manor repossessed
and sold the car. Kulkarni claimed in conversion against Manor
relying on the provisions of s27.
S27 provides that where a car has been bailed or
hired or conditionally sold, and before title in the car vests in
the debtor he disposes of it to a private purchaser in good faith
and without notice of the hire-purchase or conditional sale, that
disposition shall have effect as if the creditor’s title had vested
in the debtor immediately before that disposition so enabling good
title to pass. Had there been a disposition/sale by Gwent when it
was a debtor?
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By GlobalData
First instance judgment
At first instance, the judge looked at the
presumption in Rule 5 of Section 18 Sale of Goods Act 1979 (Rule 5)
which provides that where there is a contract for the sale of
unascertained or future goods by description, and goods of that
description and in a deliverable state are unconditionally
appropriated to the contract, property passes to the buyer.
The judge held that property in the Mercedes had
been intended to pass when Kulkarni insured it, i.e. 11 March. As
that was prior to Gwent entering into the hire-purchase agreement
with Manor, s27 could not help Kulkarni. He appealed.
Court of Appeal’s
findings
The Court of Appeal held that for the
presumption in Rule 5 to apply, the Mercedes had to be in a
deliverable state which it was not until it had its registration
plates affixed.
There was no evidence that they had been
affixed prior to the date of delivery and Kulkarni was not bound to
have taken delivery without the plates attached.
The disposition took place at the earliest
on delivery at which time Gwent was a debtor to Manor. S27 applied
to transfer good title to Kulkarni whose appeal therefore
succeeded.
This is an interesting case,
not least as it does not involve the classical application of s27
that many readers will be familiar with.
The key point was that the Court of
Appeal found that the date of disposition to Kulkarni was held to
be when the car was delivered with registration plates and log
book, not at any earlier point in time.
The author is a partner in Wragge & Co LLP’s
Finance, Insolvency, Recoveries and Sales team
