Seddon v Driver And Vehicle Licensing Agency

The question raised on this appeal is whether the DVLA, in circumstances where it has doubts which it has decided to investigate about the age or identity of a registered “Historic Vehicle” which it knows has been advertised for sale, owes a duty of care to prospective purchasers to inform the seller of its concerns.

The judge, Justine Thornton QC sitting as a judge of the High Court, held on the trial of a preliminary issue that no such duty of care was owed. The Appellant, Mr Seddon, appeals against that decision and, in particular, contends that the threefold test set out in Caparo Industries Plc v Dickman [1990] 2AC 605 is satisfied in the circumstances in the present case. As the judge held, the loss was reasonably foreseeable. As the judge ought to have held, there was a sufficient relationship of proximity and it is fair, just and reasonable to impose a duty of care.

The DVLA is an executive agency of the Department for Transport with responsibility for the collection of vehicle excise duty and the registration of vehicles.

In October Mr Seddon 2014 purchased a continuation AC Cobra 289 (“the vehicle”) for £250,000.

As set out in the registration document issued by the DVLA, the V5C, the vehicle was registered with a declared date of manufacture of 1964, a 1964 registration number (PTF 47B) and the taxation class of a “Historic Vehicle”.

In August 2014 the DVLA knew that the vehicle was on sale and being marketed by the registered keeper. It was in possession of a print-out of the advertisement for the sale of the vehicle on the "classic cars for sale" website. The advertisement described the vehicle as a 1964 "Historic Vehicle".

On 13 August 2014, a Policy Adviser at the DVLA, by way of internal email, emailed another DVLA employee, referring to information in the sale advert that the car was built in 2002 and requesting that the vehicle's identity be investigated on receipt of notification of a change in keeper

Mr Seddon purchased the vehicle on 10 October 2014 for £250,000, relying in part on the existing V5C as evidence of the provenance of the car as a “UK registered 1964 Historic Vehicle”. Had Mr Seddon known that the registration of the vehicle was in doubt, and was liable to investigation on his application for a new registration document, he would not have purchased the vehicle.

In November 2014 the DVLA commenced an investigation into the registration of the vehicle. In March 2015 the DVLA decided to allocate a new Vehicle Identity Number and a “Q” plate to the vehicle. A “Q” plate is issued where the age or identity of the vehicle is not known. The DVLA’s “Guidelines on how you can register kit cars and rebuilt or radically altered vehicles” (“INF 26”), states in relation to “Q” registration numbers that:

Mr Seddon contends that the allocation of the “Q” plate had a significant effect on the value of the car. In mitigation of his losses he sold the vehicle for £100,000, resulting in a financial loss of £150,000 which he claims as damages.

The above facts reflect the agreed facts upon which the preliminary issue was tried. These are set out in more detail in the judgment at [8]-[26], as summarised below with some additional facts taken from the documents.

In 2008, Adrian Hamilton of Duncan Hamilton and Co Ltd commissioned Brooklands Motor Company to construct a classic sports car, a continuation AC Cobra 289. The vehicle was allocated vehicle chassis number CSX 2620. It was granted a FIA 'Historical Technical Passport’ (“HTP”) on 20 August 2009 stating that the vehicle had an “asserted” year of manufacture of 1964.

Mr Hamilton completed the requisite application for the vehicle to be registered with the DVLA as a “Historic Vehicle”. This included a Built Up Vehicle Inspection Report which stated that all the major components of the vehicle were “Refurbished Original”, a letter signed by John Owen, Chief Engineer of AC Cars stating that the vehicle “has been fully rebuilt by AC Cars, the original manufacturers, using the original refurbished major components and parts manufactured to the original 1964 specification” and the HTP. The application for registration stated that the date of original registration was “01/01/64” and that the year of manufacture was 1964.

In September 2009, the vehicle was inspected on behalf of the DVLA by Mr Tim Hanley, a vehicle inspection officer, who reported that he considered that “the vehicle is OK for a 1964 age-related mark”. Ms Joy Shumack of the DVLA’s Standards and Compliance department confirmed that “the evidence is acceptable to allocate a 1964 age related mark”.

On 1 October 2009, the vehicle was allocated the Vehicle Registration Number PTF 47B, following the DVLA’s investigation and physical examination. The V5C named Adrian Hamilton as the registered keeper. Section 3 of the document is headed “Special notes”. The notes include the statement "Was registered and/or used.

The car was subsequently advertised for sale. The vehicle was bought by an Austrian individual and exported to Vienna.

In October 2013, Mr Rod Leach, sole proprietor of his firm Nostalgia, acquired the vehicle and applied for its re-registration following importation back into the UK. The

Mr Leach subsequently advertised the vehicle for sale.

On 13 August 2014, Ms Beverly Morgans, a Policy Adviser at the DVLA, by way of internal email, emailed another DVLA employee, referring to information in the sale advert for the vehicle and another AC Cobra, stating that:

“The above two vehicles are currently advertised for sale as ‘recreation’ vehicles built in 2002 using the 1960’s original jigs. However, when registered in 2003 and 2009 they were both treated as original historic vehicles and allocated age related registration, historic tax exemption and 1966/1964 dates of manufacturer instead of newly built replicas.

Please can you set ITT 246 on both records with a note to refer to policy when a change of keeper is received. No changes should be made to the record”.

An ITT 246 involves an investigation into the registration of a vehicle.

Mr Seddon purchased the vehicle on 10 October 2014 for £250,000. He was a bona fide purchaser for value in good faith and relied in part on the existing V5C as evidence of the provenance of the car as a “UK registered 1964 Historic Vehicle”.

Mr Seddon applied to be registered as the new keeper of the car on 10 October 2014. His application was made on the basis that the car was a historic vehicle. He did not receive a new V5C as expected. He received no acknowledgement or written response from the DVLA, nor did the DVLA make him aware of their investigation.

Not having received any response, Mr Seddon telephoned the DVLA 14 days or so after his application when he was told that the vehicle's registration was under investigation.

On 21 November 2014, the DVLA commenced an investigation into the registration of the vehicle. The DVLA communicated with Mr Leach in connection with the investigation, despite having received Mr Seddon's application for registration as the new keeper (usually denoting a change of ownership).

Throughout their investigation of the vehicle, the DVLA did not communicate with Mr Seddon or make him aware that they were dealing with the matter via Mr Leach.

On 26 March 2015, a representative of the DVLA wrote to Mr Leach indicating that the DVLA had decided to allocate a new Vehicle Identity Number and the allocation of a "Q" plate to the vehicle. The original registration was now void. The outcome of the investigation was not communicated by the DVLA to Mr Seddon.

On 13 May 2015, Mr Seddon wrote to the DVLA querying the non-receipt of the new V5C. A representative responded on 21 May 2015, informing him that she had been conferring with Mr Leach throughout the investigation. She stated that following investigation the vehicle PTF 47B could no longer be classified as historic and would be allocated a new VIN and "Q" plate. She enclosed a copy of her letter dated 26 March 2015 to Mr Leach. This was the first item of correspondence by the DVLA to Mr Seddon.

Further correspondence took place in May and July 2015. In response to a solicitor's letter, the DVLA advised Mr Seddon to ask an affiliated AC Owners Club to date the major components of his vehicle under reconstructed classic car guidelines.

In October 2015, the vehicle was inspected by a representative for the AC Owners Club and a recognised expert on AC Cobras. On 13 October 2015, the representative emailed the DVLA, giving his opinion on the provenance of the car. He concluded that the chassis, body and suspension parts were all manufactured in the 2000s, but to the correct 1964 specification. He urged the DVLA not to allocate the vehicle a "Q" plate. His recommendation was not accepted by the DVLA.

The DVLA wrote to Mr Seddon on 12 November 2015 confirming the decision to reregister the car with a "Q" plate.

Mr Seddon contacted Brooklands Motor Company, who originally built the car, and was provided with a document showing that the chassis of the vehicle had been manufactured in 2008. Until this date Mr Seddon had never seen this document.

Mr Seddon mitigated his losses and sold the vehicle for £100,000, incurring a financial loss of £150,000, being the difference between the purchase price and the price obtained for the vehicle on sale.

The relevant statutory framework is set out at [27]-[31] of the judgment.

In summary, the Vehicle Excise and Registration Act 1994 (“VERA 1994”) sets out the functions of the Secretary of State for Transport which the DVLA is to perform with regard to vehicle excise duty and vehicle registration.

In relation to excise duty, this is payable upon the licences issued to vehicles that are registered under VERA 1994 (section 1(1C)). Section 6 of VERA 1994 places the obligation to levy and collect duty upon the Secretary of State, and for this purpose the Secretary of State and his officers (i.e. the DVLA) have the same powers, duties and liabilities as the Commissioners of Customs & Excise and their officers.

In relation to registration, Part II of VERA 1994 (in particular section 21(1)) sets out the obligation for the Secretary of State to register vehicles in such manner as he thinks fit. Section 22(1)(dd) permits him to make regulations which require a person, by or through whom a vehicle is sold or disposed of, to furnish the person to whom it is sold or disposed of with documents relating to the vehicle's registration. Section 22A(3)(c) specifically permits him to make regulations which provide for the correction of errors in certificates.

The principal regulations made under the Act are the Road Vehicles (Registration and Licensing) Regulations 2002 (the “2002 Regulations”). Regulation 3(1) refers to the GB register which is maintained on behalf of the Secretary of State by the DVLA. Regulation 10 sets out details as to registration of vehicles and regulation 10(7) provides that the Secretary of State may refuse to issue a registration document for a vehicle if he is not satisfied that the vehicle accords with those particulars.

Regulations 14 and 15 set out rules as to the correction of registration documents and the issuance of new registration documents, including the power to inspect any vehicle which is sought to be registered to ensure that it accords with the particulars furnished when the licence was issued (regulation 15(1)(a)). Schedule 3, paras 3 and 4 provide a right of appeal against the decision made by the Secretary of State following any such inspection.

Section 45 of VERA 1994 makes it an offence for a person to make declarations or provide information which is knowingly false or misleading, including declarations made in connection with an application for a vehicle licence or allocation of a

As the judge found, and as was not challenged on appeal, the purpose of VERA 1994 “is to: (a) to collect tax and raise revenue for Government; and (b) to ensure vehicles operating on the roads in the UK are registered”.

The judge addressed the law at [42]-[57] of the judgment. No criticism is made of her summary of the applicable law.

The judge noted at [42] that the parties were agreed that she should adopt the approach taken by the House of Lords in Customs & Excise Commissioners v Barclays Bank Plc [2007] 1 AC 181 to considering a duty of care in respect of economic loss. As stated by Lord Bingham at [4], there are three tests established on the authorities for deciding whether a defendant sued as causing pure economic loss to a claimant owes him a duty of care in tort, namely (1) the assumption of responsibility test; (2) the threefold test, and (3) the incremental test.

The judge considered various authorities relating to each of these tests and in particular the case of Reeman v Department of Transport [1997] PNLR 618. That case concerned the purchase of a commercial fishing vessel in reliance upon a Department of Transport certificate indicating compliance with regulations relating to seaworthiness. An error had been made in the calculation of stability and, when this was later discovered, the certificate was withdrawn. The purchaser sued the Department of Transport claiming damages for economic loss. The Court of Appeal held that no duty of care was owed as there was insufficient relationship of proximity and because it would not be fair, just and reasonable to impose liability for economic loss.

The judge then applied the law to the facts of the case, having regard to each of the three legal tests.

In relation to the assumption of responsibility test, she held that it was not satisfied, in particular because: (1) in issuing the V5C the DVLA was performing a statutory function and not acting voluntarily or doing anything akin to contract; (2) the statement in INF26 that "Although seen by many enthusiasts as a seal of disapproval, they have proved to be a useful consumer protection aid" could not be read as the DVLA voluntarily accepting responsibility to protect consumers, which would, in any event, be inconsistent with the ambit of the statutory regime, and (3) Mr Seddon was relying on the V5C for a purpose other than that for which it was issued.

In relation to the threefold test, she held that foreseeability of loss was established, finding at [69] that:

“In my judgment, it should have been foreseeable to the DVLA that a purchaser in the position of Mr Seddon could suffer loss in circumstances where the DVLA delayed its decision to investigate the provenance of the car”.

She held, however, that there was insufficient relationship of proximity, in particular because: (1) the class size was indeterminate as, following the guidance provided by Reeman, it was not capable of ascertainment or in existence at the material time, and (2) “the cases of Caparo v Dickman and Reeman v Department of Transport instruct this Court to focus on the class of those within the circle of responsibility when the statement is made. In 2009 and 2013, when the incorrect registration certificates were issued, Mr Seddon was part of an unascertainable and potentially unlimited class”

She also held that it would not be fair, just and reasonable for the DVLA to owe a duty of care to prospective vehicle purchasers such as Mr Seddon, in particular because: (1) such a party could protect himself by stipulating for contractual warranties or arranging his own expert investigation/inspection and (2) the disparity between the excise duty (£245 a year) and the potential liabilities, in this case £150,000.

In relation to the incremental test, she held that Reeman was powerful authority for denying the existence of any duty of care.

Her conclusion was as follows:

“79.

I have applied the well-established legal tests set out in authorities which are binding on this Court. I have considered the tests separately. I have also 'cross checked' the factors against one another to enable me to step back from the labels and consider matters in the round. I have borne in mind that I consider it should have been foreseeable to the DVLA that a purchaser in the position of Mr Seddon could suffer loss in circumstances where the DVLA delayed its decision to investigate the provenance of the car.

80.

Nonetheless, I have arrived at the clear view that I am not persuaded that the DVLA owes a duty of care to Mr Seddon. The DVLA was performing its functions under a statutory regime designed to raise vehicle excise duty. Mr Seddon chose to rely on the car registration document for a purpose of his own – the purchase of a historic car. Analogous case law does not permit a duty of care. In entering into a private commercial transaction for the purchase of the car, Mr Seddon could have taken steps to protect himself against the loss he subsequently incurred”.

The grounds of appeal challenged the judge’s conclusion on each of the three legal tests. In oral submissions, however, Mr Black QC’s main focus was on the threefold test.

He submitted that the fundamental mistake made by the judge was her misplaced reliance on the Reeman case, which was clearly distinguishable. The judge wrongly equated the issue of the certificate in Reeman with the issue of the V5Cs in this case. The key date is August 2014 when the DVLA first had doubts about the age or identity of the vehicle but decided to postpone its investigation. That is the time at which it is contended that the duty of care arises. There was no equivalent factual circumstance in Reeman. The judge’s failure to recognise this distinction led her into error in that she mistakenly analysed the issue of proximity, and of whether the imposition of a duty of care would be fair, just and reasonable, by reference to the date of the issue of the V5Cs in 2009 and 2013, rather than August 2014.

Mr Black accepted that the DVLA has no general duty to maintain accurate records for the protection of prospective third party purchasers. He submitted, however, that this case is about whether, in the particular circumstances, when the DVLA has information that doubts the integrity of a registration and knows the vehicle is up for sale, it has a responsibility to ensure that a prospective purchaser is protected.

At the time that the doubts arose and the decision was made to delay the investigation, the class of prospective purchasers was clearly delineated, being limited to those who sought to purchase the car from the registered keeper, Mr Leach. There was therefore sufficient proximity.

It was also fair, just and reasonable for a duty of care to be imposed in such circumstances. It was submitted that it cannot be right for the DVLA by its actions to conceal from a prospective purchaser that they have doubts about the age or identity of the vehicle. Such doubts, whether right or wrong, may well affect a decision of whether or not to purchase the vehicle, as they did in this case. The DVLA should not be allowed to escape its responsibility for its conduct when it was or should reasonably have been known that the delayed decision to investigate the provenance might lead to a purchaser such as Mr Seddon suffering loss.

Leading cases in relation to assumption of responsibility include Hedley Byrne & Co Ltd v Heller & Partners Ltd [1964] AC 465; Henderson v Merrett Syndicates Ltd [1995] 2 AC 145 and Customs & Excise Commissioners v Barclays Bank Plc.

Factors which will often be relevant to whether there has been an assumption of responsibility include the following:

I agree.

I also agree.