Kulkarni v Manor Credit (Davenham) Ltd

Section 27 of the Hire Purchase Act 1964 protects a good-faith private purchaser where a motor vehicle is disposed of by a debtor during the relevant hire-purchase period. Under the Sale of Goods Act 1979, rule 5(1) is only a prima facie rule. Property passes before delivery only where the statutory conditions and the parties’ intention support that result. A car without registration plates may not be in a deliverable state if the buyer would not be bound to take delivery. Where a dealer knowingly lacks title, identification, appropriation and apparent assent obtained by dishonest pretence may not establish an earlier transfer. In such circumstances, delivery may be the relevant disposition under section 27.

Gwent Fleet Management agreed to supply Dr Kulkarni with a Mercedes. The car was sourced and owned by Manor Credit, which hired it to Gwent under a hire-purchase agreement on 14 March 2008. Gwent delivered the car to Dr Kulkarni that evening, although it had purportedly identified and appropriated it earlier by reference to its registration number and insurance arrangements.

Manor Credit later repossessed the vehicle. Dr Kulkarni brought a conversion claim, relying on section 27 of the Hire Purchase Act 1964. The Recorder held that property had passed by 11 March, before Gwent became Manor Credit’s hirer. The central issue on appeal was whether property had passed before delivery.

1. Appeal allowed. Lord Justice Rix gave the judgment, with Lord Justice Wilson and Sir Scott Baker agreeing. The relevant disposition under section 27 of the Hire Purchase Act 1964 could occur when an earlier agreement to sell matured into a sale or purported sale while Gwent was Manor Credit’s hirer.
2. Rule 5(1) of section 18 of the Sale of Goods Act 1979 is a prima facie rule for identifying the parties’ intention. It requires goods of the contractual description, in a deliverable state, unconditional appropriation and the buyer’s assent. The statutory presumption may be rebutted by the contract, the parties’ conduct and the circumstances.
3. Goods are in a deliverable state only when the buyer would be bound under the contract to take delivery. The question concerns the physical state of the goods. The absence of registration plates was not merely a trivial defect: Dr Kulkarni would not have been bound to accept delivery of a car which he could not lawfully drive. The car was therefore not shown to have been in a deliverable state before delivery. [1922] 1 KB 343 (CA) supported the focus on the actual state of the goods.
4. Rule 5(2) provides a long-stop presumption that delivery to the buyer, or to a carrier or bailee for transmission, without reservation of disposal amounts to unconditional appropriation. Delivery and transfer of property need not always coincide, but delivery is likely to be the intended time where no earlier transfer is established.
5. Alternatively, Gwent knew that it lacked title and had dishonestly represented that it could transfer title. Its appropriation and Dr Kulkarni’s insurance arrangements were consequently unreliable indicators of an intention to transfer property before delivery. The principles reviewed in Carlos Federspiel & Co SA v Charles Twigg & Co Ltd (1957) Ll Law Rep 240, including the importance of common intention, delivery, risk and the final decisive act, supported that conclusion.
6. The court made clear that a seller without full ownership may nevertheless transfer such property as it possesses, including a possessory title. It did not adopt the broader statement in Rowland v Divall [1923] 2 KB 500 (CA) that there can be no sale where the seller has no right to sell.

• Court of Appeal (Civil Division). Allowed Dr Kulkarni’s appeal from the decision of Mr Recorder Hartley-Davies in the County Court at Cardiff. The Court of Appeal held that the statutory exception applied and entered judgment for Dr Kulkarni under [2010] EWCA Civ 69.