Freeman v Walker

Under section 27 of the Hire Purchase Act 1964, a first private purchaser of a motor vehicle can obtain good title despite an earlier hire-purchase agreement. The protection applies where the vehicle was disposed of before title vested in the debtor, the prior purchaser was a trade or finance purchaser, and the first private purchaser bought in good faith without notice of the agreement. The vehicle’s passage through several dealers does not prevent a later non-trade buyer from being the first private purchaser. Once the statutory conditions are satisfied, the finance company’s claim to recover the vehicle fails, and downstream claims based on the supposed liability likewise fail.

Mr Walton acquired a Bentley under a hire-purchase agreement and later sold it to Mr Brice. It passed through Mr Walker before being bought by Mr Freeman, who was an innocent purchaser for value.

Mr Freeman consented to judgment returning the car to the finance company and later recovered £49,000 from Mr Walker. Mr Walker recovered the same sum from Mr Brice. The county court then awarded Mr Brice £42,425 plus costs against Mr Walton, finding that Mr Walton had sold the car to Mr Brice.

Mr Walton appealed against that judgment. The sole issue was whether section 27(3) of the Hire Purchase Act 1964 gave Mr Freeman good title and a defence to the finance company’s claim.

The appeal was allowed. Lord Justice Dyson delivered the judgment, and Mr Justice Wall agreed.

1. Section 27(1). The statutory precondition was satisfied. The vehicle had been bailed under a hire-purchase agreement and Mr Walton had disposed of it before property in it vested in him. He remained the debtor because sums remained outstanding under the agreement.
2. Section 27(3). Mr Walton, Mr Brice and Mr Walker were trade purchasers. Mr Freeman was the first private purchaser because there was no evidence that he was a trade purchaser, and the trial judge’s description of the other participants implied that Mr Freeman was outside the motor trade. He had bought in good faith and without notice of the hire-purchase agreement.
3. The statutory deeming provision therefore operated as if the finance company’s title had vested in Mr Walton immediately before his disposal of the vehicle. Mr Freeman consequently had good title and a complete defence to the finance company’s claim for return of the car.
4. The assumption underlying the settlements between Mr Freeman, Mr Walker and Mr Brice was mistaken. Mr Walker and Mr Brice had no liability on the claims made against them, so their settlements were not reasonable. The same conclusion applied to the resulting claim against Mr Walton.

Section 27(3) had apparently not been drawn to the trial judge’s attention and was not addressed in the judgment below. The judgment in favour of Mr Brice was set aside. The order for costs below was also set aside, with no order substituted, and there was no order as to the costs of the appeal.

1. Court of Appeal (Civil Division): allowed Mr Walton’s appeal and set aside the judgment below.
2. Reading County Court: found Mr Walton to be the seller to Mr Brice and awarded Mr Brice £42,425 plus costs against him.