Bought a car that had outstanding finance, finance company have seized the car

[saj87]

I bought a car in a private sale just over 2 months ago. I found it advertised on ebay, the car did have some light bodywork damage to it, and a price was agreed, and sale took place. I had the bodywork damage repaired by a bodyshop, and as i have begun to use the car, the police have seized the car as it had been reported stolen by the finance company. This was the first time I became aware that the vehicle had outstanding finance. I have yesterday made contact with the finance company, and advised them that I had actually bought the car in a private sale, and that I had done some research into this matter, and that I believe that I was offered protection under section 27 of the Hire Purchase Act 1964, as I bought the car in good faith not knowing that it was subject to finance, and they have since emailed as below:

"Dear Sir,
Many thanks for contacting our offices.

Please can we request that you submit information to show that you were the purchaser of the vehicle.

We will then investigate if you are an innocent purchaser of the vehicle.

To start our investigations we will need;

.A copy of driving licence.
.An up to date V5
.As receipt or sales invoice for the vehicle
.Any HPI checks done before the point of sale
.Where you purchased the vehicle from
.The name of the person who you purchased the vehicle
.The original advertisement for the vehicle
.How you paid for the vehicle and any proof of this.

You may also include any other information which you deem relevant to the investigation an example of this would be any repair work which may have been done to the vehicle."

Please could someone give me some advise as to how to correctly approach this situation.

[R0b]

The starting point is that there is a presumption that if you purchased the car in good faith without knowledge of it being on HP then you are protected and deemed an innocent purchaser. It is up to the creditor to show that you did have knowledge that it was on HP.

There is also no harm in assisting and providing information to the finance company although it is not mandatory to carry out a HPI check. If I recall, the courts have said that there needs to be 'actual notice' and not 'constructive notice' i.e. someone should have or ought to have known that the car was subject to finance.

Unless you have any serious objection, there shouldn't be any reason why you can't respond to their request, although I would provide them with a photocopy of the V5C not the original as that should be sufficient. Giving the original version means you have nothing to hold on to regarding the car.

You may also want to consider mentioning the costs spent on repairing the car, and the fact that (assuming) the car is was used as a means of transport both work and pleasure and since the car is now in their possession, you will likely incur additional costs which, unless they release the car to you pending investigation (which I doubt they will do) you expect them to cover your costs whilst inquiries continue. It may also be worth how long you expect the inquiries to take as of course the detrimental effect its having on yourself, and in any event should be carried out promptly.

Obviously if they reject your claim that you were the innocent purchaser then your only other route is going to be taking the matter to court. The reality is that unless the finance company can prove you had notice of the finance, you weren't the first purchase of the car or were otherwise in cahoots with seller, the finance company is going to lose at court - if you choose to take it that far.

[saj87]

Hi,

Thanks for the advice. I will, as advised provide the requested information, and will wait to hear a response

[R0b]

Also, as an FYI that might ease some of your nerves, see a court case comment below from a solicitors firm.

https://awhsolicitors.co.uk/articles...-repossession/

[saj87]

Hi Rob,

Thats really helpful thanks. I'll keep you updated as matters progress

[saj87]

Hi Rob,

I have instructed a solicitor to represent me in this matter, who has unfortunately informed me that due to the fact that i was a previously a director of a dormant company which had never traded, which was listed as involved in motor trade activities with companies house, i cannot rely upon the Hire Purchase Act, as it applies to a private purchaser only. This doesnt seem right to me, as I had purchased the car in good faith privately for my own personal use, and further more This company in question had never traded, and furthermore i sold this company to another individual some time before the purchase of my vehicle.

Please find below a copy of the correspondence sent to me this morning by my solicitor.
*

"Dear Mr %%&


Thank you for your email.

*

Unfortunately, as you have been/are a motor trader, you are unable to rely upon the Hire Purchase Act. The provisions in that Act apply to a private purchaser only, they specifically preclude motor traders.

*

As such, I do not think you have any prospects of obtaining ownership rights to the vehicle and a claim against Santander to seek to recover the vehicle has no prospect of success.

*

Kind regards"



Please could you share your opinion on this.

*

[R0b]

I'll respond in a bit more detail but your solicitor seems to be wrong in my view. The fact that you were a director of a dormant company for these purchases is irrelevant. Look at S.29 of the Act (click here):

(2) 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) of providing finance by purchasing motor vehicles for the purpose of bailing or (in Scotland) hiring them under hire-purchase agreements or agreeing to sell them under conditional sale agreements,

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

So you are right in your thinking, that the vehicle was not sold for the purposes of carrying on business as a motor trader or finance company, it was a private sale. Why don't you challenge the solicitor and ask him/her to explain why he/she thinks that you are not a private purchaser within the meaning of the Act, especially given the fact you were a former director and the company was sold before the purchase ever took place.

Just to be clear, s.27 is concerned with the facts at the time of the disposition, this is not a case of criminal law where previous history is relevant to the present action.

Obviously I could be missing something that your solicitor is aware of but based on that response, it seems like the wrong opinion.

[R0b]

Just to add, have a look at the Court of Appeal case GE Capital Bank v Rushton (link) especially para. 38 which sets out a helpful explanation.

38. 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.

[saj87]

Hi Rob,

Thanks for your advice and assistance. I did speak with the solicitor this morning and raised the issue that I bought the vehicle for my own private use, and furthermore, i was no longer a director of the dormant limited company at the time of the disposition, he advised he would contact the finance company again. I have highlighted the contents section 29 of the HPA Act to him,, but his response was that even though he agrees with the contents of the Act, in his experience a court would not uphold my claim.

I have also since forwarded the link for the Court of Appeal case GE Capital v Rushton, and highlighted the contents of paragraph 39 to him, and asked for his thought regarding that.*

Once I have a reply I will keep you informed.

Once again thank you so much for your assistance in this matter.

[pt2537]

Hi Rob,

Thanks for your advice and assistance. I did speak with the solicitor this morning and raised the issue that I bought the vehicle for my own private use, and furthermore, i was no longer a director of the dormant limited company at the time of the disposition, he advised he would contact the finance company again. I have highlighted the contents section 29 of the HPA Act to him,, but his response was that even though he agrees with the contents of the Act, in his experience a court would not uphold my claim.

I have also since forwarded the link for the Court of Appeal case GE Capital v Rushton, and highlighted the contents of paragraph 39 to him, and asked for his thought regarding that.

Once I have a reply I will keep you informed.

Once again thank you so much for your assistance in this matter.

Courts can be a lottery, however it seems to me that you have an arguable point, and if argued adequately you should have a real strong prospect of success.

[R0b]

Just out of curiosity, how did the solicitor know about your director position, did you tell him and I guess more importantly, is Santander aware? Were you actively in the motor trade or is there some other explanation?

[saj87]

I believe it was santander who made my solicitor aware of the director position. I havent ever been involved in the motor trade. The company in question was set up, as a potential business venture with a potential business partner who had experience in the motor trade industry, but these talks never materialised into any kind of business partnership or any business activity of any kind. Hence why the company was dormant, and companies house records would demonstrate that the company has not traded at all, as it has only ever had dormant accounts filed, there isnt even a business account for the company.

[R0b]

Fair enough, at least their solicitor did have half a brain cell to check your background!

Based on what you've said, there seems to be a reasonable prospect of success, and just because you had a previous business partnership in the motor trade doesn't automatically qualify you as an expert or someone who should know about this sort of stuff. I suspect Santander might be angling at arguing that you had a business which was in the motor trade and you should be held to a higher standard of knowledge than the ordinary consumer which, as a result, you ought to have carried out a HPI check or something like that.

The reasons you've given are plausible and as I mentioned before, the courts have in past said that you need to have actual notice of the car being subject to HP. I guess the next steps are up to you, if your solicitor says you don't have much chance of winning then you may want to take it on alone, assuming the car was under £10k any claim will likely be allocated to the small claims track where legal costs are not generally recoverable.

[saj87]

Hi Rob,

I received a letter yesterday from the solicitors for santander dated 26 February 2020, which I will forward onto my solicitors. As expected they have stated in the letter that I have no claim to title of the vehicle, for a number of reasons. They allege that i do not satisfy the requirements of the HPA Act. Reason are as below:

1. They claim that I have not provided sufficient evidence of the purchase of the vehicle, namely the beneficiary of the funds advanced for the purchase of the vehicle, which is incorrect as I have provided the purchase receipt for the vehicle, which states the name of the seller.

2. I didnt carry out my own HPI checks prior to purchase.*

3. Santander notes that i am a director and person of significant control of a company which is in the motor trade, ( this is incorrect as i had disposed of this company sometime before the purchase of the vehicle, as wells as the fact this company was dormant and had never traded), and as a person who acts in the business of buying and selling motor vehicles, santander considers i would not be deemed a private purchaser, even if the vehicle was purchased for my own private use.

4. There was no conditional sale agreement in place at the time of my purchase between santander and their customer, as it had been rescinded by santander.*

They also enclosed redacted copies of the conditional sale agreement, invoice at time of their purchase of the vehicle back in 2018, and a letter from santander to their customer giving notice of the termination of the agreement.*

Please find below a copy of the letter from the solicitors for Santander:

“We refer to your email dated to our client dated 18 February in which you have claimed to have title to the vehicle.”
SCUK respectfully resists any claim to title to the vehicle. SCUK is the owner of the vehicle and title to the Vehicle could pass to any third party including you.
SCUK’s position is further explained below
SCUK’s Purchase of the vehicle
On 4 Decemnber 2018, SCUK entered into a conditional sale agreement (“the agreement”) with its customer (“the customer”). Pursuant to the Terms of the Agreement, our client bailed the vehicle to the client on Conditional Sale Terms. We enclose a redacted version of the Agreement for ease of reference.
SCUK purchased the vehicle on 4 December 2018, for the purpose of bailing it to the customer, pursuant to the terms of the agreement. We enclose a copy of the purchase invoice, evidencing SCUK’s purchase of the vehicle.
The Agreement was rescinded with the customer on 16 September 2019 due to fraud – a redacted copy of the notice of rescission is enclosed for your reference. Title to the vehicle would not pass until finance under the Agreement had been paid in pull. SCUK can confirm that finance under the Agreement remains outstanding and has never been paid in full.
SCUK’s financial interest in the Vehicle remains marked at HPI.
SCUK’s Title to the Vehicle
SCUK would refer to the general rule in regards to title in matters like this, being the nemo dat quad non hablet, (“the nemo dat rule”). Pursuant to the nemo date rule, no one can transfer title to something they have not got title to.
Put simply, SCUK is the rightful owner of the vehicle. The customer did not acquire title to the vehicle. The customer was not entitled to, or authorised to sell the vehicle, in the circumstance, title to the vehicle will not pass to any third party, including you.
Exception to the Nemo Dat Rule
SCUK appreciates that there are exception to the Nemo Dat Rul. However, SCUK does not consider the exceptions apply to your alleged purchase of the vehicle.
The customer was not acting as SCUK’s agent and was not authorised to sell the Vehicle.
SCUK would also respectfully put forward that you are not afforded the protection of the Hire Purchase Act 1964, (“the HPA”). In order to be offered protection under the HPA there must be:

1. A sale of the Vehicle.
2. The sale must be by a seller (the customer) under the terms of a conditional sale / hire purchase agreement, (the agreement)
3. The buyer (you) is a private purchaser, and
4. The vehicle was purchased in good faith and without notice of the finance agreement, (the agreement).

SCUK considers you do not satisfy the requirements of the HPA, in that:

1. You have not provided sufficient evidence of your alleged purchase of the vehicle – namely the beneficiary of the funds advanced for the vehicle.
2. There was no conditional sale agreement in place at the time of your purchase as it had been rescinded by SCUK.
3. SCUK notes that you are a director and person of significant control of *** Autos Ltd, (CRN 1112****). As a person who acts in the business of buying and selling motor vehicles, *SCUK considers you would not be deemed a private purchaser, even if the vehicle was allegedly purchase to be used in your private capacity.
4. SCUK would question whether the vehicle was purchased in good faith and without notice of the Agreement, given your evidence fails to include any details of a HPI check being conducted by you prior to purchase. SCUK would refer to the circumstances in which you no longer became in possession of the vehicle.

Going Forward
SCUK is in possession of the vehicle. SCUK is entitled to sell the vehicle in order to mitigate the loss under the Agreement. SCUK reserves the right to sell the vehicle without any further reference to you.
Should you wish to pursue SCUK for the recovery of the vehicle or damages in respect of the same, then that is entirely your prerogative. However, SCUK will robustly will resist any claim bought by you and it would reserve the right to rely upon this correspondence should the question of costs arise.
It is understood that you have sought legal advice in regards to this matter. We consider that would be advantageous to both you and SCUK, as we would expect following further legal advice, such advice would confirm to you that your proposed claim to title to the vehicle has no merit and should be pursued.
*
Yours faithfully”


My thoughts regarding santander rescinding the agreement before i actually bought my car, wouldn't change my position, as i did not know that the car had outstanding finance on it, and had no reason to suspect otherwise, as the guy i bought the car from had the V5 document, all the paperwork was there, in my opinion the price was right considering the condition of the car, as it did have some cosmetic issues with it. They also mention in the letter that i am a director and a person of significant control for a ltd company which traded in motor vehicle, hence would not be classed as a private purchaser.*

Please could you let me have your thought on this, and in the meantime, im going to forward this correspondence onto my solicitors.

Thanks
*

[R0b]

I think reasons 1 to 3 are wishy washy and as you say, you've supplied them with the information asked for. The poit about being a motor trader is also irrelevant as if the HPI check since there is no legal obligation to do one. You can still enter into the agreement in good faith even if a HPI check wasn't done, because good faith is whether you were honest, not negligent.

Reason 4 might be the stumbling block but I don't recall that s.27 only applies if the agreement has an active HP agreement. The legislation says that the car must have been subject to a HP agreement which is not the same as saying the car being subject to a HP agreement which is legally in force at the time of the disposition.

I will have a look and see if there's any relevant case law but if there's not, then it might be a decision for you to consider if you want to pursue it. Will get back to you when I can.