GE Capital Bank Ltd v Rushton & Anor

The statutory exception to nemo dat quod non habet for a private purchaser of a motor vehicle does not protect a buyer who acquires vehicles as a one-off business venture with a view to resale at a profit. Under sections 27(2) and 29(2) of the Hire Purchase Act 1964, prior establishment as a motor trader is unnecessary. An isolated transaction may itself amount to carrying on the relevant business. An established trader buying a vehicle for personal use is not automatically excluded. A first private purchaser from a trade purchaser may nevertheless acquire good title under section 27(3) if acting in good faith without notice. In assessing bona fides, price is only one circumstance, and the purchaser’s perception of value may matter more than a later auction price.

A finance house financed T&T Motors Ltd’s acquisition of vehicles while retaining title. When T&T faced financial pressure, it sold its remaining stock to Stephen Rushton, who intended to resell it, and one vehicle to Richard Jenking. The Bank terminated the finance arrangement and claimed the vehicles or their value in conversion.

The Walsall County Court dismissed the Bank’s claim, treating Rushton as a private purchaser acting in good faith, and entered judgment for the defendants on their counterclaim. The appeal concerned the meaning of private and trade purchaser, the use of auction prices in assessing bona fides, the conversion claims, Jenking’s title to the VW Golf, and a late attempt to rely on section 2 of the Factors Act 1889.

The appeal was allowed in full against Rushton and, as against Jenking, in respect of every vehicle except the VW Golf.

1. Sections 27(2) and 29(2) of the Hire Purchase Act 1964 distinguish between private purchasers and purchasers acquiring vehicles in the course of a business of buying vehicles for resale. The statutory language focuses on the purchaser’s purpose at the time of acquisition. A person need not already be an established motor trader. A one-off trading venture carried through with a view to profit may constitute the relevant business. Rushton was therefore a trade purchaser and obtained no title under the statutory exception (paras [38]–[40]).
2. The authorities on the Moneylenders Acts provided limited assistance because their statutory language and context differed. The court drew more useful guidance from consumer-protection legislation, including Davies v Sumner [1984] 1 W.L.R. 1301, R. & B. Customs Brokers Co. Ltd v United Dominions Trust Ltd [1988] 1 W.L.R. 321 and Stevenson v Rogers [1999] Q.B. 1028.
3. The remaining grounds were unnecessary to the result. Nevertheless, later auction prices could not be treated as evidence of earlier value without adjustment for depreciation. In assessing bona fides, the relevant question was what the purchaser believed the vehicles were worth, considered with the whole circumstances of the transaction. The Recorder’s finding that Rushton acted bona fide was not sufficiently unsafe for appellate intervention (paras [41]–[47]).
4. After termination of the finance agreement, Rushton converted the vehicles by selling the VW Golf, asserting title and refusing to return the remaining cars. Jenking was liable for the other six vehicles because the evidence and the parties’ conduct showed his continuing involvement in taking possession, storing and retaining them (paras [48]–[50]).
5. Under section 27(3) of the Hire Purchase Act 1964, the first private purchaser from a trade purchaser may obtain good title by proving good faith and absence of notice. Jenking discharged that burden in relation to the VW Golf. The Bank therefore had no claim against him for that vehicle, and he was entitled in principle to the relevant sale proceeds (paras [51]–[55]).
6. The court refused permission to raise belatedly a point under section 2 of the Factors Act 1889. Such a point would ordinarily be admitted only in a quite exceptional case where counsel had deliberately chosen not to argue it and judgment or draft judgments had been prepared on the argued basis. Damages for conversion were assessed at the date of conversion: £64,550 against Rushton and £55,700 against Jenking (paras [56]–[57]).

• Court of Appeal (Civil Division): allowed the Bank’s appeal in full against Rushton and in relation to six vehicles against Jenking: [2005] EWCA Civ 1556.
• Walsall County Court: Madam Recorder Darbyshire dismissed the Bank’s claim and entered judgment for the defendants on their counterclaim.