VFS Financial Services Ltd v JF Plant Tyres Ltd

For the purposes of Hire Purchase Act 1964, “dispose of” is confined to the specified forms of disposition, including a sale or contract of sale in which the vehicle is transferred for money. The statutory reference to a transaction “purporting” to be a disposition does not extend the definition to transactions outside those categories. Taking a vehicle in satisfaction of an existing debt, where the consideration is forbearance or set-off rather than money, is therefore not a disposition under section 29. The court recognised that questions may arise about payment of a genuine price by non-cash means, including part exchange, but left those questions open.

The claimant financed a Volvo truck under a hire purchase agreement. After the agreement was terminated for non-payment, the claimant sought its return. The defendant had taken possession of the vehicle from the debtor in settlement of debts owed for goods and services and claimed protection under section 27 of the Hire Purchase Act 1964 as an innocent purchaser without notice.

The claimant applied for summary judgment, arguing that the transfer was not a “disposition” because no money consideration had passed. The issue was whether taking the vehicle in settlement of debts fell within section 29 of the Act. The court determined that issue while leaving the defendant’s good-faith purchaser defence for trial.

1. Judgment for the claimant. The defendant’s section 27 protection remained an issue requiring a trial, but the court determined that the transfer could not constitute a statutory disposition.
2. Sections 27 and 29 of the Hire Purchase Act 1964 create an exception to the nemo dat rule for specified transactions. The words “sale” and “contract of sale” were not defined in the Act, but the concept of sale had long been associated with an exchange of property for money. In that context there was no need to extend the statutory exception to less conventional transactions.
3. The phrase “purporting to be a disposition” related back to the specified categories of sale, contract of sale, bailment and transfer. It did not broaden the definition to include transactions outside those categories.
4. A disposition under section 29 was therefore limited to the specified types of transaction where the vehicle was transferred in return for money. The transaction relied on by the defendant involved the vehicle being taken in satisfaction of debts. The debts represented only part of the stated value, and the arrangement amounted to barter rather than a sale for money.
5. The court followed Royscott Trust v Burno Daken Ltd & David Ball, an unreported High Court decision on materially similar facts. Its ratio was clear and correct, and there was no reason to depart from it.
6. The court left open questions concerning payment of a genuine price by means other than cash, including part exchange, particularly where the value of the item traded in equals or exceeds the price of the vehicle acquired.