Waite v Paccar Financial Plc

A contractual indemnity must be construed with the agreement as a whole. Where provisions governing a vehicle sale form a complete contractual code, the parties cannot select one provision while rejecting another applicable provision. A sale treated by both parties as falling within that code was governed by the contractual requirement that the vehicle be sold without warranty as to condition. A finance company’s voluntary settlement payment, made without a finding or concession about the vehicle’s condition, did not arise out of that sale and could not be recovered under the indemnity. The appeal was therefore allowed and the original dismissal restored.

The appellant hired a lorry from the respondent finance company. After the hire ended, the vehicle was sold to another finance company for the use of a purchaser identified by the appellant. The purchaser complained that the lorry lacked pulling power, and the respondent contributed £7,000 to a settlement of proceedings brought against the other finance company.

The respondent sought reimbursement under contractual provisions requiring the hirer to maintain the vehicle and indemnify the finance company, and under a sale-related indemnity. The Deputy District Judge dismissed the claim. The Circuit Judge allowed the respondent’s appeal, found liability, and remitted quantum. The central issue in the Court of Appeal was whether the respondent could recover its settlement payment under the agreement.

1. Appeal allowed. The decision of the Circuit Judge was set aside and the Deputy District Judge’s dismissal of the claim was restored.
2. The hire agreement had to be construed as a whole. Clause 8(b), dealing with renewal and disposal, was a complete code governing a sale by the hirer as the finance company’s agent. Its provisions operated together, so the hirer could not rely on the sale-related indemnity in clause 8(b)(iv) without also receiving the protection in clause 8(b)(iii), which required a sale without warranty as to the vehicle’s condition.
3. Although the sale was formally made by the respondent rather than by the appellant as agent, both parties had conducted themselves as if clause 8(b) applied. The appellant identified the purchaser, the vehicle was sold as seen, and the appellant received the contractual share of the proceeds. The parties were therefore estopped by convention from denying that the clause 8(b) code governed the sale.
4. The respondent’s payment to settle the dispute was made voluntarily, without any finding or concession about the vehicle’s condition. It did not arise out of a sale governed by clause 8(b), so no liability arose under clause 8(b)(iv). The bracket issue, the meaning of proceedings, and the proposed implied term were consequently unnecessary to decide.
5. Alternatively, if clause 4 required consideration, it applied only to acts or omissions during the period of hire. The Circuit Judge had also erred by treating reports from the earlier dispute as expert evidence in the present proceedings and by substituting her findings for findings properly open to the Deputy District Judge. Compliance with clause 4(iii), as found at first instance, left no separate liability under clause 4(i). These observations were alternative to the clause 8 conclusion.

• Court of Appeal (Civil Division): [2012] EWCA Civ 901 — allowed the appellant’s appeal and restored the Deputy District Judge’s order dismissing the claim.
• Brighton County Court, first appeal: On 29 October 2011, Her Honour Judge Jakens allowed the respondent’s appeal against the Deputy District Judge, found liability against the appellant, and remitted quantum.
• Brighton County Court, first instance: Deputy District Judge Mills dismissed the respondent’s claim on 17 May 2011.