GE Capital Bank Ltd v Rushton & Anor

A fundamental principle of the common law relating to the transfer of property in chattels is that a transferor cannot give a better title than he has himself – nemo dat quod non habet. That principle is, however, subject to numerous exceptions designed to safeguard consumers and to promote commercial activity in general. This appeal is concerned with the exception to the common law rule embodied in section 27 of the Hire Purchase Act 1964 (as amended by the Consumer Credit Act 1974) in favour of a private purchaser who buys a motor vehicle in good faith without notice of a defect in title.

The claimant, G. E. Capital Bank Ltd (“the Bank”), is a finance house whose business includes lending money to dealers in motor vehicles. On 15^th March 2002 it entered into a Master Trading Agreement with a company called T&T Motors Ltd (“T&T”) under which it agreed to provide T&T with finance of up to £100,000 to enable it to purchase motor vehicles for the purposes of its business. The agreement authorised T&T to buy motor vehicles as agent for the Bank and stated that on being provided with evidence of the purchase of a vehicle and of payment for it the Bank would pay T&T 80% of the purchase price. T&T was entitled to offer the vehicles for sale and was given an option to buy them from the Bank for a sum equivalent to the amount originally advanced. The agreement provided that title to the vehicle remained vested in the bank until the whole of the sum advanced in respect of it had been repaid.

Between March 2002 and January 2004 T&T bought a number of vehicles on behalf of the Bank under the terms of the agreement. Property in the vehicles passed to the Bank and the vehicles themselves became part of T&T’s stock in trade.

The owner and managing director of T&T was a Mr. Antonio di Cesare. In November 2003 T&T was very short of money and Mr. di Cesare therefore approached the first defendant, Mr. Rushton, for a private loan. Mr. Rushton was not willing to grant T&T a loan, but he introduced Mr. di Cesare to a friend of his, the second defendant, Mr. Jenking. Although he had not met Mr. di Cesare before, Mr. Jenking was prepared to offer T&T a short term loan on behalf of the company through which he himself carried on business, Rushwood Properties Ltd (“Rushwood”). As a result on or about 21^st November 2003 Rushwood lent £40,000 to T&T secured by a debenture of that date. The debenture provided that the loan was repayable on demand and carried interest at 3% per annum above the base lending rate of Barclays Bank.

On 6^th January 2004 Mr. Jenking wrote to T&T requiring it to repay the whole of the loan together with interest within 14 days. On 16^th January he went to see Mr. di Cesare taking Mr. Rushton with him for support. However, T&T was not in a position to repay the loan without realising some of its assets, so after some discussion it was agreed that T&T should have until the end of the month to sell its stock to enable it to repay the loan to Rushwood and that Mr. Rushton would buy any vehicles that remained unsold at that date.

At the end of January 2004 T&T sold its remaining stock of twelve second-hand cars and one van to Mr. Rushton for a total price of £64,500. Descriptions of the vehicles, their mileages and the prices paid for them were set out in an invoice dated 31^st January 2004. Among them were the seven cars that are the subject of these proceedings. The total price paid by Mr. Rushton in respect of those seven vehicles as recorded in the invoice was £52,000. Mr. Rushton paid £40,000 direct to Rushwood in settlement of T&T’s debt (but nothing in respect of accrued interest) and the balance of £24,500 to T&T.

On 3^rd February Mr. Rushton with the assistance of Mr. Jenking took possession of all thirteen vehicles. He moved them to a barn which he had rented from a local farmer to whom he had been introduced by Mr. di Cesare. There they remained awaiting disposal. Mr. Jenking kept a key to the barn. Mr. Rushton has always admitted that he bought the vehicles as a matter of business intending to sell them privately or to the motor trade as the opportunity might arise.

A few days later one of the Bank’s auditors happened to drive past T&T’s premises. He noticed that there were no cars on the forecourt and became suspicious. Shortly afterwards, on 10^th February, the Bank terminated the agreement with T&T and became entitled to recover the seven vehicles in question.

In early March 2004 T&T went into creditors’ voluntary liquidation. An employee of the Bank, Mr. Craig Stonier, attended the creditors’ meeting at which he learnt that the vehicles had been sold to Mr. Rushton. Somehow he managed to obtain a telephone number for Mr. Rushton which he passed to one of his colleagues, Mr. David Thomas. In due course Mr. Thomas managed to speak to Mr. Rushton who said that he had bought the vehicles in good faith and refused to divulge their whereabouts.

Meanwhile, on 11^th February Mr. Rushton had already sold one of the cars, a VW Golf, to Mr. Jenking for £9,000, £2,000 more than the invoice showed he had paid T&T for it. He agreed that Mr. Jenking should have until the end of March to pay him for it. However, before that time came Mr. Jenking learnt that T&T had gone into liquidation and he thought that it would be a good idea to ensure that no one else was claiming an interest in it. He therefore enlisted the help of the Citizens Advice Bureau to carry out a check on the HPI register. Having discovered that the Bank claimed an interest in the car, he asked the Bureau for further assistance and as a result on 24^th March it wrote a letter to the Bank on his behalf asking it to accept that he had acquired a good title to it. On 14^th May Mr. Rushton’s solicitors wrote to the Bank on his behalf asking it to remove from the HPI register the note of its interest in the car.

After that nothing of any great significance occurred until 8^th July 2004 when the Bank brought proceedings against Mr. Rushton and Mr. Jenking seeking the return of the cars or their value, damages for conversion and interest. The value it put on the cars was £71,675. The defendants served a defence and counterclaim in which they denied converting the cars and claimed damages arising from their inability to dispose of them due to the Bank’s assertion of its interest.

Eventually all concerned realised that the cars would simply depreciate in value the longer they remained in Mr. Rushton’s possession unsold. They therefore reached an agreement in September 2004 under which they would be handed over to the Bank to enable them to be sold at auction and the proceeds held by the Bank’s solicitors to abide the outcome of the action. The cars were delivered to the auctioneers on 29^th September 2004 and were subsequently sold for a total of £45,963.78. It became apparent at that stage, if not before, that the odometer readings of four of the cars were higher, in some cases very significantly higher, than those shown on the invoice which T&T had given to Mr. Rushton. In five cases the odometer readings were also higher, again in some cases very significantly higher, than those which T&T had notified to the Bank at the time it made its application for finance. The difference in mileage obviously affected the values of the vehicles in question.

The action came on for trial in the Walsall County Court before Madam Recorder Darbyshire on 1^st March 2005. The Bank was represented by Mr. William Buck of counsel who also appeared for it on the appeal; the defendants represented themselves. Mr. Buck very helpfully provided for the assistance of the defendants and the court a detailed skeleton argument summarising the facts and setting out in neutral terms the principles of law relating to the tort of conversion and the provisions of the Factors Act 1889, the Sale of Goods Act 1979 and the Hire Purchase Act 1964 which enable a seller to pass a better title than he has himself.

On 3^rd March 2005 the Recorder dismissed the Bank’s claim and gave judgment for the defendants on their counterclaim in the sum of £52,000. She reached her decision by the following route. She was satisfied that under the terms of the Master Trading Agreement between the Bank and T&T all seven cars belonged to the Bank at the time they were sold to Mr. Rushton. Having considered the various statutory provisions mentioned earlier, she held that the only one of any relevance to the case before her was section 27 of the Hire Purchase Act 1964. She held that Mr. Rushton was a private purchaser within the meaning of the Act and, not without some hesitation, she found that when he bought the cars from T&T he was acting in good faith and without notice of the Master Trade Agreement. In those circumstances she held that property had passed to Mr. Rushton when he bought the cars from T&T, that the Bank’s claim therefore failed and that the defendants were entitled to judgment on their counterclaim. The defendants were content to enter judgment in the sum of £52,000, despite the fact that the cars were apparently worth more than that when Mr. Rushton had originally acquired them, since it was sufficient to cover their outgoings.

The Bank appeals against the Recorder’s decision on three grounds. The first is that on the true construction of section 27 of the Hire Purchase Act 1964 Mr. Rushton was not a private purchaser. The second is that in reaching her decision on whether Mr. Rushton had acted in good faith the Recorder had wrongly had regard to the prices at which the cars had been sold at auction in September 2004 as providing direct evidence of their value at the end of January or the beginning of February that year. The third is that her decision that Mr. Rushton had acted in good faith was contrary to the weight of the evidence and wrong.

The relevant parts of section 27 of the Hire Purchase Act 1964 provide as follows:

“(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.”

Section 29(2) of the Act provides as follows:

“In this Part of this Act, “trade or finance purchaser” means a purchaser who, at the time of the disposition made to him, carries on a business which consists, wholly or partly,—

(a)

of purchasing motor vehicles for the purpose of offering or exposing them for sale, or

(b)

. . . . . . . . . .

and “private purchaser” means a purchaser who, at the time of the disposition made to him, does not carry on any such business.”

Mr. Rushton candidly admitted in the course of his evidence that he bought the vehicles from T&T as a business venture with a view to making some money out of them. However, he was not in any sense an established motor dealer, nor was he seeking to set himself up as one in the long term. The Recorder’s attention was drawn to Benjamin’s Sale of Goods, 6^th ed., paragraph 7-090 in which the learned authors suggest that the expression “carries on business” denotes a certain degree of regularity and the holding of oneself out to do such business. Applying that test, she held that the purchase of the vehicles was an isolated transaction as far as Mr. Rushton was concerned and that he was therefore a private purchaser within the meaning of the Act.

Before us attention was again directed primarily to the words “carries on a business” in section 29(2). Mr. Beaumont argued forcefully that the expression denotes an element of continuity and naturally refers to a person who is already an established motor trader at the time of the disposition. In support of that submission he drew our attention to a number of decided cases, beginning with those mentioned in footnote 61 to paragraph 7-090 of Benjamin, namely, Litchfield v Dreyfus [1906] 1 K.B. 584, Newman v Oughton [1911] 1 K.B. 792 and Marshall v Goulston Discount (Northern) Ltd [1967] Ch. 72. Since these are all decisions on the Moneylenders Acts 1900-1927 it may be helpful to set out the provisions of section 6 of the Moneylenders Act 1900 on which the argument turned in each case.

Section 6 of the Moneylenders Act 1900 provided as follows:

“The expression “money-lender” in this Act shall include every person whose business is that of money-lending, or who advertises or announces himself or holds himself out in any way as carrying on that business; but shall not include

(a)

any pawnbroker in respect of business carried on by him in accordance with the provisions of the Acts for the time being in force in relation to pawnbrokers; or

. . . . . . . . . . .

(d)

any person bona fide carrying on the business of banking or insurance or bona fide carrying on any business not having for its primary object the lending of money, in the course of which and for the purposes whereof he lends money; . . . . . .”

In Litchfield v Dreyfus the plaintiff carried on business as an antique dealer. In the course of the business he gave credit to customers and took bills from them in payment of amounts they owed for purchases, some of which he discounted and renewed from time to time. When he ceased business he sold his stock and took bills for the greater part of the purchase money which he also discounted and renewed from time to time. After he ceased business he became a consultant and assisted two dealers by discounting their customers’ bills. He also assisted some old friends in the trade and a few people with whom he had been connected in business with loans and by discounting bills for them, but he did not advertise as a moneylender and did not discount bills for people outside his own circle. In an action by the plaintiff on bills given in respect of a loan to an old customer the defendant pleaded that he was an unregistered moneylender and could not recover.

This unmeritorious defence failed. Farwell J. held that credit given to customers and to those who purchased stock at the plaintiff’s closing down sale were loans incidental to the carrying on of his business as an antique dealer and so within proviso (d) to section 6. The judge did not regard the subsequent discounting of bills to assist a few old friends as carrying on the business of a moneylender, holding that whether a person carries on the business of a moneylender depends on the facts of the case. He did not attempt to define with any greater precision what was necessary to bring a case within the section. In my view, therefore, apart from evidencing a certain amount of judicial distaste for the argument, the authority provides little or no assistance in determining the question before us.

In Newman v Oughton the claimant sought to execute a judgment against goods in the possession of a judgment debtor. The goods were claimed by a firm of pawnbrokers who said that they were included in a bill of sale granted to them. At the trial of the resulting interpleader it appeared that the bill of sale had been given as security for an advance of £50. The plaintiff argued that an advance on a bill of sale did not constitute business conducted in accordance with the provisions of the Pawnbrokers Act 1872, that the claimant was an unregistered moneylender and that the transaction was therefore void. Ridley J. decided the matter on the basis that the claimant had not acted in breach of the Pawnbrokers Act and was therefore entitled to the protection of section 6(a) of the Moneylenders Act, but he also expressed the view that since there was evidence of only one loan it could not be said that the claimants had been proved to be persons whose business was that of moneylending within the meaning of the Act. Avory J. was of the same view, holding that one isolated transaction was not enough to bring the claimants within the definition of a moneylender. It follows that both judges thought that for the Act to apply there had to be an established business of moneylending. The case can therefore be said to provide some support for the defendants’ argument.

Marshall v Goulston Discount (Northern) Ltd was a case about discovery (or disclosure, as it is now called). The plaintiff brought an action for a declaration that a charge and bill of sale that he had executed in favour of the defendants were void because they formed part of moneylending transactions carried on by the defendants who were unregistered moneylenders. In support of that argument he sought discovery of all documents in the defendants’ possession relating to offers of, and proposals for, advances and correspondence relating to loans coming into existence after the date of the relevant transactions. The defendants resisted giving discovery, but were ordered to do so by the judge. Their appeal was dismissed on the grounds that documents coming into existence after the date of the transaction might shed some light on the nature of their business at the earlier date. The dispute turned on whether there was an established rule of practice that discovery should not be ordered of documents coming into existence after the date of the transaction. I can find nothing in the decision that bears on the question before us.

In addition to those cases a number of other authorities were drawn to our attention. The first of these was Kirkwood v Gadd [1910] A.C. 422. In that case the House of Lords was concerned with section 2 of the Moneylenders Act 1900 under which a moneylender was required to carry on his business only in his registered name and at his registered address. Mr. Beaumont relied on a passage in the speech of Lord Atkinson at page 431 in which he said that the words “carries on business” implied a repetition of acts and a similar expression of opinion can be found in the speech of Lord Loreburn at page 423. Mr. Buck, however, was able to point to another passage in the speech of Lord Atkinson at page 433 in which he said:

“Whether one isolated transaction carried out by a money-lender from its inception to its completion at a place other than his registered address amounts or does not amount to the crime of carrying on business elsewhere than at his registered address, within the meaning of the statute, must depend on the particulars or circumstances attending the transaction. The carrying out of one such transaction does not necessarily amount to an offence, but circumstances are conceivable where it might amount to it; . . . . . . . .”

The issue in that case was whether an injunction should be granted to prevent a moneylender from taking possession under a bill of sale in circumstances where the agreement for a loan, the advance and the granting of the security all took place at the borrower’s residence and the speeches must be read with that in mind.

Litchfield v Dreyfus, Newman v Oughton and Kirkwood v Gadd, as well as other decisions on the Moneylenders Acts, were all considered by this court in Conroy v Kenny [1999] 1 W.L.R. 1340. In that case too the central question was whether at the time the loan was made the lender was a person whose business was that of moneylending within the meaning of section 6 of the Moneylenders Act 1900. Having reviewed the authorities Kennedy L.J. who gave the leading judgment accepted that

“. . . . . . a licensed moneylender who sets up business with an office probably falls within section 6 of the Act of 1900 when he makes his first loan, even if he never makes another, because at the time when that loan was made his business was that of moneylending.”

When considering the assistance to be derived from decisions on section 6 of the Moneylenders Act 1900 two factors have to be borne in mind. The first is that the primary expression used to define a moneylender is a person “whose business is that of money-lending”. Although the word “business” may often denote a degree of repetition and continuity, it need not always do so, as Kennedy L.J. observed in Conroy v Kenny. The expression “carrying on [that] business”, which one also finds in section 6 and which is more suggestive of a continuing state of affairs, is partly dictated by the use of the words “. . . . . advertises or announces himself or holds himself out in any way as . . . .” The second thing to bear in mind is that one can detect in some of the cases (Litchfield v Dreyfus is perhaps a good example) a degree of reluctance on the part of the judges to allow unmeritorious defendants to take advantage of the Act. In those circumstances it may be more profitable to look for guidance to decisions on statutory provisions providing protection for purchasers of goods and services insofar as they contain broadly comparable language.

Three such decisions have been drawn to our attention. The first is Davies v Sumner [1984] 1 W.L.R. 1301, a decision of the House of Lords on section 1(1)(a) of the Trade Descriptions Act 1968. This provides that

“Any person who, in the course of a trade or business

(a)

applies a false trade description to any goods; or

(b)

supplies or offers to supply any goods to which a false trade description is applied;

shall, subject to the provisions of this Act, be guilty of an offence.”

The critical words are “in the course of a trade or business.” In that case the defendant carried on business as a self-employed courier for a television company carrying films and packages from place to place using his own car for the purpose. From time to time he traded his car in for a new one. On one occasion when trading in his car he told the dealer that it had travelled 18,000 miles whereas it had actually travelled 118,000 miles. As a result he was prosecuted for a breach of the Trade Descriptions Act. His defence was that he did not sell the car in the course of a trade or business within the meaning of the Act. Lord Keith of Kinkel with whom the other members of the House agreed said at page 1305:

“Any disposal of a chattel held for the purposes of a business may, in a certain sense, be said to have been in the course of that business, irrespective of whether the chattel was acquired with a view to resale or for consumption or as a capital asset. But in my opinion section 1(1) of the Act is not intended to cast such a wide net as this. The expression “in the course of a trade or business” in the context of an Act having consumer protection as its primary purpose conveys the concept of some degree of regularity, and it is to be observed that the long title to the Act refers to “misdescriptions of goods, services, accommodation and facilities provided in the course of trade”. . . . . . . . . . . The need for some degree of regularity does not, however, involve that a one-off adventure in the nature of trade, carried through with a view to profit, would not fall within section 1(1) because such a transaction would itself constitute a trade.”

In R. & B. Customs Brokers Co. Ltd v United Dominions Trust Ltd [1988] 1 W.L.R. 321 the plaintiff was a freight forwarding and shipping agency which bought a car for the use of one of its directors through the defendant, a finance company. The agreement between the plaintiff and the defendant excluded any condition or warranty relating to the car’s condition or fitness for purpose. The roof of the car leaked and in due course it was rejected by the company which claimed damages for breach of the condition implied by section 14(3) of the Sale of Goods Act 1979 that the car was fit for its purpose. The defendant sought to rely on the terms of the contract to exclude any such liability; the plaintiff relied on section 6(2) of the Unfair Contract Terms Act 1977 (which renders ineffective any term purporting to exclude liability for breach of section 14(3)) on the grounds that it was dealing as a consumer.

By section 12(1) of the Unfair Contract Terms Act a party to a contract deals as a consumer if he “neither makes the contract in the course of a business nor holds himself out as doing so”. The critical question, therefore was whether the plaintiff had bought the car in the course of a business. Having referred to the speech of Lord Keith in Davies v Sumner, Dillon L.J. said at page 330:

“Lord Keith emphasised the need for some degree of regularity, and he found pointers to this in the primary purpose and long title of the Trade Descriptions Act 1968. I find pointers to a similar need for regularity under the Act of 1977, where matters merely incidental to the carrying on of a business are concerned, both in the words which I would emphasise, “in the course of” in the phrase “in the course of a business” and in the concept, or legislative purpose, which must underlie the dichotomy under the Act of 1977 between those who deal as consumers and those who deal otherwise than as consumers.

This reasoning leads to the conclusion that, in the Act of 1977 also, the words “in the course of business” are not used in what Lord Keith called “the broadest sense.” I also find helpful the phrase used by Lord Parker C.J. and quoted by Lord Keith, “an integral part of the business carried on.” The reconciliation between that phrase and the need for some degree of regularity is, as I see it, as follows: there are some transactions which are clearly integral parts of the businesses concerned, and these should be held to have been carried out in the course of those businesses; this would cover, apart from much else, the instance of a one-off adventure in the nature of trade, where the transaction itself would constitute a trade or business. There are other transactions, however, such as the purchase of the car in the present case, which are at highest only incidental to the carrying on of the relevant business; here a degree of regularity is required before it can be said that they are an integral part of the business carried on, and so entered into in the course of that business.”

Neill L.J. observed that the expression “in the course of a business”, or similar language, is to be found in statutes such as the Sale of Goods Act 1979, the Trade Descriptions Act 1968 and the Supply of Goods and Services Act 1982. He noted that section 1(1) of the Trade Descriptions Act creates a criminal offence, but nonetheless thought that it would be unsatisfactory if, when dealing with broadly similar legislation, the courts were not to adopt a consistent construction of the same or similar phrases. For that reason he thought that the court should follow the guidance given in Davies v Sumner when construing section 12(1) of the Unfair Contract Terms Act.

A very similar question arose for consideration in Stevenson v Rogers [1999] Q.B. 1028. In April 1988 the defendant, who carried on the business of a fisherman, sold his vessel Jelle to the plaintiff with a view to having a new boat built to his requirements. In the event he bought a replacement vessel which he continued to use for his business. The question for the court was whether the sale of the Jelle had been made “in the course of a business” within the meaning of section 14(2) of the Sale of Goods Act 1979 so that it was subject to an implied term that the vessel was of merchantable quality. The leading judgment in the Court of Appeal was given by Potter L.J. Having considered Davies v Sumner and R. & B. Customs Brokers Co. Ltd v United Dominions Trust, he noted that it was common ground between the parties that

“. . . . . in the field of consumer protection three broad categories have been developed to identify whether a sale is made “in the course of a business,” namely (a) a sale in a one-off venture in the nature of a trade carried through with a view to profit; (b) a sale which is an integral part of the business carried on; (c) a sale which is merely incidental to the business carried on but which is undertaken with a degree of regularity.

In categories (a) and (b) the transaction is in the course of a business because it is the conduct of the very business itself. In (c) the transaction is in the course of such business because its regularity has made it so . . . . . .;”

The appellant submitted that the transaction in that case was one that was an integral part of the respondent’s business, since he had to replace his boat from time to time, rather than a transaction of a kind that was made infrequently and merely incidental to that business. However, he also submitted that the words “in the course of a business” in section 14(2) of the Sale of Goods Act should be given a broader construction than that given to them in Davies v Sumner so that it was unnecessary to determine whether that was so or not. Potter L.J. pointed out that the changes to the original language of section 14 of the Sale of Goods Act brought about by the Supply of Goods (Implied Terms) Act 1973 and the Unfair Contract Terms Act 1977 had transformed the code enshrined in the 1893 Act from a corpus of rules which in principle applied to all contracts of sale into one containing a number of variants, dependent on factors such as whether one of the parties is acting in the course of a business or whether a party does or does not deal as a “consumer”. He concluded that the court was free to construe the words of section 14(2) at their wide face value and should do so in order to provide the degree of protection to consumers that Parliament had intended. He therefore held that the sale was one made in the course of a business. Russell and Butler-Sloss L.JJ. agreed.

Mr. Beaumont referred us to two further authorities in other areas of the law, Smith v Anderson (1879) 15 Ch. D. 247 and Commissioners of Inland Revenue v Marine Steam Turbine Co. Ltd [1920] 1 K.B. 193. In Smith v Anderson a number of investors subscribed for shares in telegraph companies which they vested in trustees to manage the investment on certain terms. A question arose whether this arrangement contravened section 4 of the Companies Act 1862 which prohibited the formation of an association consisting of more than 20 persons “for the purpose of carrying on any business that has for its object the acquisition of gain” unless it was registered in accordance with the Act. It was cited only for a passage in the judgment of Brett L.J. who at page 277 said that the expression “carrying on” implied a repetition of acts and excluded the case of an association formed for doing one particular act which was never to be repeated. However, the context in which the statutory language fell to be considered is so far removed from that of the present case that I am unable to derive much assistance from it.

Commissioners of Inland Revenue v Marine Steam Turbine Co. Ltd concerned an appeal from the Special Commissioners who had held that the respondent company, which had transferred to a third party its licence to exploit various patents for the manufacture of a marine steam turbine engine in return for the payment of a royalty on every engine sold by the third party and whose only business consisted of receiving the royalties, was not “carrying on a trade or business” within the meaning of the Finance (No. 2) Act 1915. It was also cited for a brief passage in the judgment, on this occasion of Rowlatt J., at page 203 in which he expressed the view that the word “business” was used in the sense of “an active occupation or profession continuously carried on”. Again, the words in question had to be construed in a very different context and I do not derive much assistance from this decision.

The critical issues in this case are (i) whether it is possible for a person to be carrying on a trade or business consisting wholly or partly of purchasing motor vehicles for the purpose of offering or exposing them for sale within the meaning of section 29(2) of the Hire Purchase Act 1964 at the time when he acquires his first vehicles for stock and (ii) if it is, whether Mr. Rushton can properly be regarded as falling within that description. None of the authorities to which I have referred provides the answers to these questions, although they do contain some valuable pointers. That the expression “carries on a business” may, in an appropriate context, be apt to refer to a single transaction in the way of business is, I think, clear both from Lord Keith’s remarks in Davies v Sumner and from the comment of Kennedy L.J. in Conroy v Kenny. Whether it should be construed in that way in the present context is, of course, another question.

The argument before us concentrated mainly on the two expressions “at the time of the disposition” and “carries on a business”, both of which naturally tend to direct attention to the activities of the purchaser prior to and at the time at which he acquired the vehicle in question. However, those words form part of a larger phrase which must be read as a whole and which describes the nature of the business in a way that also directs attention to the purpose for which the purchaser is acquiring the vehicle. Sections 27(2) and 29(2) draw a clear distinction between a private purchaser, who obtains the protection of the Act, and a trade purchaser, who does not. I do not think there can be much doubt that the purpose of the legislation is to provide protection to those who do not buy in the course of trade and to withhold it from those who do. In this context I think that the reference to a person who “carries on a business which consists wholly or partly of purchasing motor vehicles for the purpose of offering or exposing them for sale” is intended to direct attention not merely to the business of the purchaser immediately prior to and at the time of the disposition but also to the purpose for which the vehicle is bought. Thus, I do not think that an established motor trader who buys a car for his personal use is deprived of the protection of the Act just because he is a motor trader (although he might find it more difficult to satisfy the other requirements). Equally, however, I do not think that a person is necessarily to be regarded as a private purchaser simply because he has not previously bought motor vehicles with a view to selling them in the way of business. If a person has decided to enter the motor trade and for that purpose has obtained premises at which he intends to hold his stock, offer it for sale and carry out the formalities associated with the sale of motor vehicles, I have little doubt that he would properly be described as a person who was carrying on the business of purchasing motor vehicles for the purpose of offering them for sale at the time when he bought his first vehicle for stock. Mr. Beaumont was inclined to accept that and I think he was right to do so.

I accept, of course, that when Mr. Rushton bought the vehicles from T&T he had not taken any formal steps to set himself up as a motor dealer and at that stage had not even decided where to store them while they were awaiting disposal. However, he clearly had decided to purchase them as a business venture with a view to selling them at a profit. In those circumstances purchasing the vehicles from T&T was no less a step in carrying on a business of purchasing motor vehicles for the purpose of offering or exposing them for sale than it would have been if he had already prepared a showroom or forecourt to receive them. For these reasons I am satisfied that at the time he bought the vehicles Mr. Rushton was a trade purchaser and not a private purchaser within the meaning of the Act. It was, to adopt the words used by Lord Keith in Davies v Sumner, a one-off adventure in the nature of trade, carried through with a view to profit. That is also consistent with the fact that when Mr. Rushton sold one of the vehicles he did so “in the course of a business” within the meaning of section 14(2) of the Sale of Goods Act 1979 (Stevenson v Rogers) and “in the course of a trade or business” within the meaning of section 1(1) of the Trade Descriptions Act 1968 (Davies v Sumner). It follows that in my view Mr. Rushton did not obtain a good title to the vehicles when he bought them from T&T.

This makes it unnecessary to decide the other grounds of appeal, but since they were fully argued I shall express my views on them shortly.

Mr. Buck submitted that the Recorder was wrong to treat the prices obtained for the cars sold at auction in September 2004 as evidence of their value when Mr. Rushton bought them at the end of January because by that time their value had changed significantly. He applied to introduce new evidence to show that the true value of the vehicles at the earlier date could only be obtained from one of the trade guides, such as Glass’s Guide or the CAP Guide.

The value of the vehicles at the date of purchase was said to be relevant to the issue of Mr. Rushton’s bona fides. Before the Recorder the Bank had relied on a passage in Benjamin, paragraph 7-044 in which it is said that proof that the goods were purchased at a much lower price than the ordinary trade price is not absolute proof of bad faith but is very strong evidence of fraudulent knowledge, citing the judgment of Brett J. in In re Gomersall (1875) 1 Ch. D. 137, 150. Two comments immediately spring to mind. The first is that whether a purchase at below ordinary trade value is evidence of a lack of bona fides will depend on all the circumstances, not least the extent of the under-value. In In re Gomersall bills with a face value of £1,700 were purchased for £200, so the comment of Brett J. referred to above is entirely understandable. The second is that in order to draw the inference that the purchaser is dishonest one must assume that he is at least broadly aware of the true value of the article in question, which may or may not be the case.

The evidence in the present case is that the odometer readings of some of the cars sold at auction were much higher than those shown in the invoice to Mr. Rushton. Since all of them, apart from the VW Golf, had remained in the barn during the intervening period, the readings taken at the time of the auction can be accepted as broadly reflecting the position at the time of sale. It is not clear, however, whether Mr. Rushton was aware of the true readings when he bought the vehicles or whether, in those cases where there was a discrepancy, he was given false information by Mr. di Cesare.

It is difficult to be sure about the true value of the vehicles at the time Mr. Rushton bought them. In its particulars of claim the Bank put the total value at £71,000, a figure that the defendants appear to have been content to adopt, but that was probably based on the mileages that Mr. di Cesare had notified to the Bank when requesting payment. Calculations based on the values shown in Glass’s Guide adjusted by reference to the mileage figures obtained from the auctioneers were produced by the Bank’s solicitors in the course of the trial and provided to the Recorder for her assistance after she had given judgment on liability. These gave a total value for the cars sold at auction of £65,200 at the beginning of February. Unfortunately, the parties were at odds before us as to whether those figures had been agreed. If they were not, one might have expected the defendants to make a protest (since the figures were put forward by the Bank as agreed) and perhaps to have put forward alternative calculations of their own. They did neither, but at that stage they were representing themselves and moreover they were willing to accept by way of damages less than the value calculated by the Bank. I do not think that the position is clear enough, therefore, to allow us to treat those figures as agreed.

Since the value of a used car is dependent in part on its age, the Recorder was wrong in my view to treat the prices obtained at auction at the end of September as evidence of the value of the cars in early February without making an appropriate adjustment to reflect depreciation over the intervening period. Having said that, I do not think that the actual value of the cars at the time of purchase is what matters. Insofar as it helps one to assess the bona fides of Mr. Rushton what matters is what he thought the cars were worth, as to which the evidence is far from clear. In the end, therefore, I do not think that further evidence of the actual value of cars at the end of January is of any assistance.

This brings me to Mr. Buck’s submission that the Recorder’s finding that Mr. Rushton acted bona fide was contrary to the weight of the evidence and wrong. However, for my own part I do not think that the evidence enables one to say with any confidence that Mr. Rushton knew that he was buying the vehicles at a very substantial under-value rather than at a price which reflected a reasonable bargain. He clearly believed that he was buying at a discount to the trade price, but there is no reason to think that he knew that the price he was being asked to pay was so much less than the cars were worth that he must have realised that something was wrong. It must be remembered that T&T was under some financial pressure and was selling its entire stock in what amounted to a distress sale. In those circumstances the price could be expected to be lower than would be obtained through individual sales in the ordinary course of business. If one takes the Bank’s revised total value of £65,200 for the seven cars in question one can see that Mr. Rushton bought at a discount of a little over 20%. I do not think that is strong evidence of dishonesty. Quite apart from that, however, a decision on the purchaser’s bona fides depends on much more than the mere discrepancy between the price paid for the goods and the purchaser’s perception of their value at the time of the sale. Mr. Rushton gave evidence and was cross-examined about the value of at least one of the cars with a view to making this very point, so the Recorder had the benefit of seeing him give evidence about that very question, but he was also questioned about other aspects of the whole transaction and she had the benefit of assessing him as a witness generally. Mr. Buck said that the Recorder failed to give adequate weight to the circumstances surrounding the loan itself, but I do not think that his criticisms were entirely justified. She was clearly troubled, and rightly so in my view, about the circumstances surrounding the loan which were certainly unusual in a number of respects, but although she treated it as a separate transaction, she clearly had some regard to it as part of the context in which the sale took place. The Recorder’s finding in relation to Mr. Rushton’s bona fides is not unassailable, of course, but it is one that this court should be very slow to overturn. In my view there are insufficient grounds for doing so.

It was common ground both before the Recorder and before this court that the Bank terminated the Master Trading Agreement on 10^th February 2004 and obtained an immediate right to possession of the vehicles on that date, but not before. In the absence of any suggestion by the Bank that it became entitled to possession of the vehicles at any earlier date, I am content to assume for present purposes that that is correct. It follows, therefore, that Mr. Rushton converted the VW Golf the next day when he sold and delivered it to Mr. Jenking and that he subsequently converted the other cars both by insisting when challenged by Mr. Thomas that he had a good title to them and by refusing to return them to the Bank when asked to do so. (Mr. Buck did not place any emphasis on the fact that he had been in possession of the cars prior to receiving the telephone call from Mr. Thomas and it is unnecessary, therefore, to decide whether he was guilty of converting them at any earlier date.)

Mr. Beaumont submitted that apart from purchasing and taking possession of the VW Golf, Mr. Jenking, by contrast, had done nothing after the Bank obtained an immediate right to possession of the vehicles on 10^th February that could render him liable to the Bank in conversion. However, I am unable to accept that. The evidence given at the trial supports the conclusion (which does not appear to have been in issue) that Mr. Jenking was assisting Mr. Rushton throughout in helping him take possession of all the vehicles, putting them into store and looking after them, and that is reflected in the statements of case and in the way in which the case was presented in the court below. In its particulars of claim the Bank alleged that the cars had been converted by both defendants and they responded to the allegations against them in the same way in a joint defence and counterclaim. In their counterclaim they both made a claim against the Bank for losses which it was said they had incurred as a result of being prevented from disposing of the cars by the Bank’s assertion of title. They included the costs of storing and insuring the vehicles and depreciation. The defendants subsequently provided further information supplementing their defence in which they declined to state where the vehicles then were. At the trial Mr. Buck opened the case on the basis that the defendants were jointly liable in conversion and there was no suggestion on the part of Mr. Jenking in the submissions that he made on behalf of them both that he was not as fully involved as Mr. Rushton or that he was not liable to the Bank even if Mr. Rushton was. In these circumstances it is not open to Mr. Jenking to contend before us that he is not liable to the Bank because he did not take part in the removal or retention of the vehicles together with Mr. Rushton.

If follows that in my view Mr. Rushton is liable to the Bank for conversion of all seven cars which are the subject of these proceedings. Mr. Jenking is also liable to the Bank for conversion of the six cars other than the VW Golf. Whether he is also liable in respect of that vehicle depends on whether he obtained a good title to it despite the fact that it did not belong to Mr. Rushton at the time he sold it to him.

Mr. Beaumont submitted that if property in the cars did not pass to Mr. Rushton because he was a trade purchaser within the meaning of section 27(2) of the Hire Purchase Act 1964, Mr. Jenking obtained a good title to the VW Golf under section 27(3) of the Act when he bought it from Mr. Rushton.

Section 27(3) provides as follows:

“Where the person to whom the disposition referred to in subsection (1) above is made (the “original purchaser”) is a trade or finance purchaser, then if the person who is the first private purchaser of the motor vehicle after that disposition (the “first private purchaser”) is a purchaser of the vehicle in good faith without notice of the relevant agreement, the disposition of the vehicle to the first private purchaser shall have effect as if the title of the creditor to the vehicle had been vested in the debtor immediately before he disposed of it to the original purchaser.”

This subsection broadly mirrors subsection (2) by providing the same protection to the first private purchaser from a trade purchaser as he would have had if he had bought the vehicle from the debtor, in this case T&T. Unfortunately, the Recorder made no findings about Mr. Jenking’s bona fides or his knowledge of the agreement under which the car had been in the possession of T&T. It was not necessary for her to do so in view of the conclusion to which she had come on the effect of the sale to Mr. Rushton and she did not touch on the point in her judgment.

Although a question of this kind would normally be one for decision by the judge at first instance, if necessary after hearing further evidence, the parties asked us to determine it on the material before the court, if it became appropriate to do so, rather than remit the case to the Recorder for a further hearing. In the circumstances we accepted that we should do so in the interests of saving time and costs, despite the somewhat unsatisfactory nature of the exercise.

As it happens, Mr. Buck chose the VW Golf as the vehicle for cross-examining Mr. Rushton about his bona fides. Mr. Jenking’s bona fides was not in issue in relation to the purchase from T&T, but there are no grounds for thinking that he knew any more at that time than Mr. Rushton did about the terms on which T&T held the car. Mr. Jenking’s own state of mind is to be judged at the time he bought the Golf from Mr. Rushton about a fortnight later, but he gave evidence to the effect that he was unaware of the Bank’s interest at the time of the original purchase and certainly nothing appears to have occurred in the interim to alert him to a possible problem. T&T did not go into liquidation until early March. The price Mr. Jenking paid for the car (£9,000) was £2,000 more than Mr. Rushton had paid for it and very close to the adjusted value put forward by the Bank. The burden is on Mr. Jenking to show that he was a bona fide purchaser without notice of the agreement between the Bank and T&T, but in the circumstances I do not think that the evidence admits of any other conclusion. In those circumstances I am of the view that he obtained a good title to the car under section 27(3) of the Act. Conversion involves a wrongful interference with the rights of the true owner of the goods. Although Mr. Jenking did interfere with the Bank’s rights over the VW Golf when he bought it from Mr. Rushton, the fact that he obtained a good title to it under the Hire Purchase Act means that the Bank’s rights as owner of the car were transferred to him at the moment of sale and accordingly the Bank can have no claim against him in respect of it. Moreover, since it was his car, he is entitled in principle to recover the relevant part of the sale proceeds, £6,300, now held by the Bank’s solicitors, subject to any right the Bank may have, or may in the future be granted, to retain that sum in part satisfaction of his liability.

For these reasons I would allow the Bank’s appeal in full against Mr. Rushton. As far as Mr. Jenking is concerned, I would allow the appeal in relation to all the vehicles apart from the VW Golf.

In a case of this kind damages are assessed at the date of the conversion and it was for that reason that the Bank put forward its adjusted values. Although those figures are not agreed, they provide the best evidence we have of the value of the vehicles in February and March 2004. In my view, therefore, Mr. Rushton is liable to the bank for conversion in the sum of £64,550, being the value of the VW Golf in February and of the other six cars in March, and Mr. Jenking is liable to the Bank for conversion in the sum of £55,700, being the value in March of the six vehicles other than the VW Golf.

I agree

I also agree.