Fighting Moneybarn under s27 Hire Purchase Act 1964

[Primmybdh]

Good morning

I would be really grateful for some advice. I am a retired solicitor but with no experience in this field at all. However I find myself fighting this case on behalf of my son in law. He bought a car last September in a private sale and paid by bank transfer. He bought it at the weekend and carried out an HPI check, which flagged up a conditional sales agreement. He raised this with the seller, who provided him with a copy of an email from the finance company showing that the debt had been settled in full.

The first he knew of a problem was when bailiffs arrived and repossessed the car. This was a month ago. We have been arguing ever since and are about to send a Letter Before Action. The finance company claim the email provided by the seller was a fraud and that my son in law was, therefore, aware of the conditional sales agreement and did not buy in good faith.

My question is, where is the authority to back the assertion that the onus is on the finance company to prove that he did not buy in good faith?

[pt2537]

Hi there

Did the HPI Check flag up which company the finance was with?

[R0b]

Hi,
Moneybarn are well known for this. As a starting point I suggest you read this successful thread where, after being threatened with legal proceedings, Moneybarn decided to return the car. Link here.

The onus is on the your son in law to show good faith but whether he acted in good faith will usually depend on the facts and the evidence supplied. The duty to act in good faith is not defined in the HP Act but case law have indicated that it means acting with honesty. Carelessness or negligence is not sufficient to argue that a person did not act honestly.

The fact that Moneybarn believes the seller to be a fraud is irrelevant in this context. The key question is whether he had actual notice of it being on hire-purchase. There is a Court of Appeal case which acknowledged and confirmed that the purchaser must have actual knowledge, not constructive knowledge i.e. that you should or ought to have known.

I'll message you a copy of that decision and it is also very relevant to the point about where your son in law was handed a document to confirm it had been paid.

If you want any help with the drafting of the letter before action, post up a copy and we can comment on it.

[Primmybdh]

Hi
Thank you both so much for responding. The HPI did flag up the name, and my son-in-law tried to call Moneybarn, but it was the weekend and no-one answered. Clearly at that point he should have waited till Monday, but he apparently wanted to get it sorted out at the weekend, couldn't spare time in the week to go to London, and had no reason to doubt the email confirming settlement.

Rob, how do you come to the burden of proof of good faith resting on the purchaser? The Citizens Advice website clearly states 'that it's up to the finance company to prove you don't have good title", but their helpline can't shed any light on how they arrived at that conclusion, apart from that their legal team says so! I have found conflicting advice on the internet with regard to Dodds v Yorkshire Bank - one source says it affirms that burden of proof lies with the finance company, and another that it affirms that it lies with the purchaser. I have managed to acquire a copy of the Consumer Credit Report on Dodds, but it only deals with the main points - disposition and good faith having the same meaning as in SGA 1979 (very useful for us). The report doesn't cover burden of proof.

I am also deeply confused about s28 HPA 1964. It sets out presumptions relating to s27; so presumably to be rebutted by the finance company. So providing the provisions in s28(1)(a) and (b) are met, s28(2) applies. However, Moneybarn are arguing that my son-in-law didn't buy in good faith. So my question is, if they claim he did not buy in good faith, can they claim that the provisions of s28(!)(b) have not been met and s28(2) does not apply, or is it up to them, under these presumptions, to show that he didn't buy in good faith?

This is important because I am arguing that, under s27, title has passed to my son-in-law, and it is for the finance company to prove in court that this is not the case. Consequently, as they no longer have title, they have wrongfully interfered with the car by removing it. They claim that he does not have title because he did not buy in good faith, and so title has not passed from them under s27, and they are entitled to remove the car.

I have read the thread you pointed me to, now, and it's very encouraging.

[R0b]

Do not confuse the purchaser acting in good faith and good title to the car, they are to be treated separately for the purposes of the burden of proof. Before looking at s28 you need to consider whether the protection is available, break it down into the following criteria:

1. Is the purchaser a private buyer i.e. not a business?
2. Was the purchaser buying in good faith?
3. Does the purchaser have actual knowledge that the car was on hire purchase at the time of the sale?

I'm not going to say much on question 1 because I think that's obvious from the facts here.

On Q2, Dodds is useful in establishing that good faith is taken to mean the same as the SGA in that it meant honesty. As to the burden of proof, GE Capital v Rushton confirmed that the onus is on the purchaser to show he acted in good faith (link here):

55.

... 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

So the first stage is for your son-in-law to show he was a purchaser in good faith by having acted honestly. An example of buying in bad faith might be where he is handed the vehicle paperwork which shows a female name and then doesn't make further inquiries but continues to purchase the vehicle.

Obviously your son-in-law will be able to rely on both Dodds and Barker v Bell on the basis that a purchaser who has been told that all payments have been made and/or someone who might have initial suspicions but are laid to rest does not is analagous to his case and therefore for the purposes of s27, he did not have actual notice of it being on hire purchase.

Now, once it is established that all three criteria has been satisfied, you then go onto to the second stage which are the presumptions under s28. The presumptions are intended to assist the bona fide purchaser who might find it difficult to put the pieces together as to the transaction chain. This is where the burden of proof is now reversed and it is up to the creditor to rebut those presumptions and good title does not exist.

As the car is now collected, the claim will be for conversion and your son-in-law might want to alternatively plead trespass to goods as a back up. Damages are usually the value of the goods as at the date of conversion though if I recall from memory if the outstanding balance under the hire purchase agreement is less than the vehicle's value, that is normally awarded instead.

If Moneybarn are trying to argue that your son-in-law wasn't a good faith purchaser, then they will need to show some kind of evidence to prove it. Like I said, however, I don't think it is sufficent to say that the seller was a fraudster to negate good faith, especially in light of the decisions in Dodd and Barker. That said, if the full chain of disposition is known, then those presumptions don't apply.

[Primmybdh]

Can I take this conversation up again please? We sent a comprehensive letter before action to Moneybarn giving them a deadline of tonight (Friday). They have failed to acknowledge that letter at all. The complaints handler just sent a standard letter yesterday saying that she would deal with the complaint within the time scale set out by Moneybarn - 56 days. I’m not sure whether I should now start a claim, and if so, for money or for return of the car. I am a bit worried that a claim for conversion and return of goods might escalate it out of small claims. Help please!

[R0b]

There's a number of factors that is taken into account when allocating the case, the main one being whether the amoutn claimed is over £10,000. Unless the case is complex i.e. fraud then it's not likely to be allocated outside the small claims track.

This type of case seems relatively straightforward, because the law set its all out and this will essentially come down to the facts and whether your son in law is protected.

Doesn't sound overly complex to me but that doesn't stop the other side from raising the point and suggesting it should be allocated to another track. I've experience on several occasions where the other side has tried to bring it outside the small claims track but they were all rejected. I suspect the main reason was because there was solicitors on the other side and of course they wanted their costs back if they were successful.

*

[Primmybdh]

I have just discovered from the Financial Services Ombudsman that the 56 day timescale is set by the FCA (I thought it was an internal Moneybarn procedure), and that the time starts to run when a complaint is made to any part of the *company, and not just when it is moved to a complaint handler. I'm asking the Ombudsman to confirm that our complaint was first made on 28 January, which means that the 56 days end on 24 March. As this is only two weeks away, I'm thinking that I may hold off to see what Moneybarn come up with, and then file the claim if they don't return the car. If they do return the car, then I cannot see any reason why we can't lodge a claim after that for damages to cover such things as cost of the replacement car, travelling to arrange it, etc. That would be a more straightforward claim and cheaper to file. Am I missing anything? Incidentally, the person I spoke to at the FSO said that they are so inundated with complaints about Moneybarn that they have a small, dedicated team just working on that!

[Primmybdh]

Can I just update this thread please. 19 months on and we have just won!! We went to court last November (2020) on an application by Moneybarn to strike out one of the defendants. They had refused to tell us which of their two companies was responsible for removal of the car, and so we named both as defendants. They were absolutely slated by the judge in the County Court and costs awarded against them. We then had to wait almost another year for a final hearing. Moneybarn had accepted our argument based on Dodds and the SGA that we had acted in good faith, but argued that we had actual notice. So it all came down to Barker v Bell. Thank you so, so much Rob - I wouldn't have found that case without you.

[R0b]

Great news, I'm surprised MB was prepared to take it this far but hey ho.

I'm interested in the strike out application, did MB instruct lawyers for that or did they try and deal with it themselves? You also mentioned the judge slated them so what did he have to say about the fact they refused to provide information about which company seized the vehicle? And I'm even more curious as to what MB's excuse was for that!

If you're able to give any additional information or insight into the process on how it went, that would be great as it's going to help others out who are in the same situation with similar facts.

[Primmybdh]

MB's letter heading is 'Moneybarn Vehicle Finance, and there is a footnote at the bottom of each page to the effect that Moneybarn is a trading style of two different companies, Moneybarn No.1 Ltd and Moneybarn Ltd, both registered at the same address. They sometimes sign on behalf of Moneybarn, and sometimes Moneybarn No.1. We asked in email, on a number of occasions (around 5), which of the companies was responsible for removing and retaining the car. They ignored these requests, but in the end they replied that there was no necessity for them to provide us with such information, and consequently they refused to do so. So we named both companies as defendants and made it clear why we had done so.

MB then lodged an application to strike out one of the defendants, Moneybarn Ltd. Their legal department dealt with the application in house, but they employed a solicitor agent for the hearing. Their argument, which the judge did not accept, was that we could have worked out which company was responsible by searching at Companies House.

The judge made it very clear that he absolutely abhorred their behaviour. He accused MB of trying to trick a litigant in person and wasting everyone's time. He was extremely unimpressed that no-one from MB attended the hearing, and that consequently there was no-one to answer his questions, such as 'Where is the car now?' and 'Had MB made any attempt to recover sums from the previous, fraudulent owners?"

He ordered (inter alia) that:

'Upon the Court finding that the Defendants wilfully withheld clarification as to the appropriate Defendant in these proceedings despite explicit request from the Claimant.
And Upon the Court finding that it was reasonable and proportionate for the Claimant to issue against both Defendants in those circumstances.
And Upon the Court finding that on the basis of clarification only being provided together with the application to strike out.

then

1. The claim against the first Defendant is struck out.

2. The second Defendant having conceded during the course of today's hearing (that concession took a number of desperate emails at the hearing between the solicitor agent and MB while everyone waited for answers) that despite knowledge of the fact that the Claimant sought recovery of the vehicle in question in these proceedings have in fact sold the vehicle, the claim shall now proceed as a money claim only and no costs shall be payable to the Defendants in any event. The Second Defendant is ordered to provide a full and frank explanation as to the decision to sell the vehicle which the Claimant was seeking to recover.

3. It is further ordered to provide a full and frank account, supported by a statement of truth, of any attempts to recover or sums actually recovered from [the previous fraudulent owners].

4. The Defendants shall pay the Claimant's costs of today .......

I have no idea why MB thought it was a good idea to behave in that way. Maybe they hoped that we would opt for just one company, and choose the wrong one, so that they could apply to strike out the whole thing. Or I'm wondering if it was a tactic to make it as long-winded and complicated as possible in the hope that an inexperienced litigant in person would find it all too much and give up! It certainly looks like an own goal by MB.