Warman v. Southern Counties Car Finance Corporation Ltd (W J Ameris Car Sales, Third Party)

[1949] 2 KB 576
[1949] 1 All ER 711

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(Judgment by: Finnemore J)

Warman v
Southern Counties Car Finance Corporation Ltd (W J Ameris Car Sales, Third Party)

Court:

Judge:
Finnemore J

Subject References:
Contract
Warranty
Breach
Damages
Hire-purchase agreement
Seller lacking title
Right to set off against damages reasonable hiring charges

Case References:
Karflex Ltd v Poole, Diges t Supp. - [1933] 2 KB 251; 149 LT 140

Judgment date: 2 March 1949

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Judgment by:
Finnemore J

In this case Mr Cyril Ernest Warman, the plaintiff, is suing the defendants, the Southern Counties Car Finance Corporation Ltd for damages amounting to £294 17s 3d. The dispute arises out of a hire-purchase agreement in the usual form which was entered into by the parties on 13 September 1947, concerning a Hillman 10 horse-power saloon car. The car came from a firm called W J Ameris Car Sales who are brought in as third parties.

Under the agreement a sum of £155 was paid by the hirer, the plaintiff, as an initial payment to the defendants and the plaintiff agreed to take the vehicle on hire and to pay each month the sum of £9 18s, and when he had paid the requisite number of instalments, he was to pay another 1s and the car then became his property. Clause 11, provided:

"It is further agreed that if and when the total rent payable under cll. 1 and 2 hereof shall have been paid to the owners, the hirer shall have the option of purchasing the said vehicle and accessories for the sum of one shilling, but no option shall arise in the case of termination of hiring under cll. 8 or 9 hereof."

The plaintiff paid the £9 18s a month until April, 1948, and on 22 April according to the booklet recording the payments, he was credited with a final payment of £58 8s, so that the car then ostensibly became his property. It appears, however, that, in fact, the car was not the property at any time of the defendants. some time previously it had been the property of another hire-purchase company called the London Finance Corporation. They had hired it to another individual who, without paying any money after the initial deposit, passed it on to the the third parties, and so it came to the defendants who had no title to it whatever. There is no question of mala fides in this case. The defendants legitimately believed that they were the owners of the car, and, so believing, they entered into the hire-purchase agreement with the plaintiff. All three parties acted perfectly honestly and properly, and, as in so many of these cases, it is a question which of several innocent parties has to pay for the wrong-doing of somebody else. In May, 1948, the car was handed by the plaintiff to the London Finance Corporation, who, it is common ground, were the true owners of it at all material times. That being the case, the plaintiff says: "I am entitled as damages to the money which I have lost through this transaction. I paid the defendants a considerable sum of money for this car, which has been taken from me, and I want my money back." What, in law, he is asking for is damages for the breach of the agreement, and, in particular, for damages for breach of the express warranty, as it must be treated, that the defendants were the owners of the car.

Counsel for the defendants has taken every point he possibly could. He says, first, that there was no warranty regarding the title on the sale because the sale took place on 22 April 1948, when the final payment was made, and before that time the plaintiff had cause to believe that there was something wrong with the title. He had had a number of letters, including at least one solicitor's letter, and on the very day on which he sent the money order for the final payment (20 April) he received a writ claiming the car from him. It is said, therefore, that he could not then have been relying on any warranty given by the defendants that they were the owners of the car because he either knew, or, at least, was put on grave suspicion, that they were not the owners. If the final payment alone constituted the sale, there might be a serious point, but the agreement was made between the parties in September, 1947. There was then an agreement to sell subject to the plaintiff's making certain payments, and he ultimately made those payments. I do not think it would matter if, when there was still some payment to be made before the machinery of the contract was complete, the plaintiff had known positively that the car really belonged to another party. I think he would be entitled to say: "That is nothing to do with me. I made a binding agreement with the defendants in which they gave me this warranty that they were the owners. I am paying them the money which is due to them in order to be able to assert my rights, and I still rely, as against them, on the agreement of September, 1947." It can be put in another way, and that is that, when the agreement was entered into and an option to purchase was given, as from the moment when the hire-purchase agreement had been signed the plaintiff would have been entitled in law to have paid the whole of the balance at once and had the ownership there and then vested in him. The defendants were clearly unable to give him the proper title at any moment from the time of the contract up to 22 April when the final payment was made by him and received by the defendants. It is plain that there was a breach of the agreement which continued throughout and that the title for which the plaintiff had contracted was never given to him and could never have been given to him because it was never the defendants' to transfer. Once he had made his agreement, I do not think it matters if he did know positively in April that the title in the car was in somebody else, but I do not think the evidence goes that far. It is hardly necessary to say that the mere fact of receiving a claim from another party, or even of a writ having been issued, does not prove that party's claim to be sound, and that is all there was.

Counsel for the defendants raised a somewhat similar point when he said that the damage here flowed, not from the breach by the defendants, but from the plaintiff's own conduct-in other words, it is argued that when the plaintiff received these letters from the London Finance Corporation and their solicitors in January, February and March, 1948, he ought at once to have asked the defendants for an explanation. Had he done so, it is suggested, they would have been able to arrange with the London Finance Corporation to pay off the balance on the other hire-purchase agreement and so save the plaintiff's position. Whether that would have happened or not I do not know, because when that situation did arise as between the defendants and the London Finance Corporation and when that suggestion was made by the defendants to them, they flatly rejected it. Even so, there was no duty that I can see for the plaintiff to have gone to the defendants for an explanation. It might have been a sensible thing to do, but there was certainly no call, and certainly no legal responsibility of any kind, on him to do so. He did take legal advice and go to the third parties from whom he had got the car and tell them about it. He also consulted the Automobile Association who advised him at all costs to continue making the payments, and he did so. I cannot see any unreasonable conduct on his part, and I do not think it can be said that any of the damage flows from his acts. The damage flowed from the fact that the defendants purported to hire and sell to him something which, although they did not know it, was not theirs to hire or to sell.

The last point is more difficult. The defendants contend that, if they are liable in damages to the plaintiff, an allowance should be made against the amount thereof of a sum equal to a reasonable charge for the hire of the car by the plaintiff for the period during which he had possession. In his judgment in Karflex Ltd v Poole , Goddard J referred to this very problem but expressed no view. He said ([1933] 2 KB 265):

"I am expressing no opinion as to what might be the position if a person who was not in fact the owner, but who honestly believed he was the owner of property let out on hire-purchase, was faced with a counterclaim by a hirer who had enjoyed the use of the property, we will say, for half the time that the hire-purchase agreement was contemplated to run, to recover all the money he had paid without making some allowance for the use of the chattel. It will be time enough to decide that when the question arises."

A hire-purchase agreement such as this is in law an agreement in two parts. It is an agreement that, for a certain length of time, the hirer shall rent the car. If, during the period or at the end of the period the hirer does not wish to buy the car, he is not bound to do so. On the other hand, the essential part of the agreement is that the hirer has the option to purchase it, and it is common knowledge-and I suppose, commonsense-that when people enter into a hire-purchase agreement they enter into it not only for the purpose of hiring, but also for the purpose of purchasing by what are, in effect, deferred payments. If at any stage the option to purchase goes, the whole value of the agreement to the hirer goes with it. If he wanted to make an agreement merely to hire a car he would make it, but he enters into a hire-purchase agreement because he wishes to have the right to purchase the car. That is the whole basis of the agreement. I should have thought that, if the defendants are unable to carry out the contract, they are not entitled to claim on a sort of quantum meruit by saying: "Although we could not carry out the agreement and could not give you the title to this car, you did have the use of it for six or seven months and you must pay us the hiring charges for those months." Another way of looking at the matter is that since the car was not at any time the property of the defendants, they cannot call on the plaintiff to pay them money for the hire of it. I should have thought it was plain that, if A purports to hire a car to B and delivers to B a car which belongs, not to himself, but to C-a car to which A had no right whatever in law-and B does not pay the hiring charges, A would have no possible claim for them. It is difficult to see how he would ever frame his case. How could he come into court and say: "I claim money from B arising out of my hiring to him C's car, to which I have no right." I cannot conceive that any court would direct B to pay A money for the use of somebody else's car, and I do not see here how the defendants can claim any money from the plaintiff for the use of someone else's car. That is what their claim comes to.

I, therefore, take the view that it is not open to the defendants to claim, either by way of set-off or counterclaim, money which is expressed in this hire-purchase agreement to be for the hire of the car for the months during which the plaintiff had the use of the car, it not being the defendants' car at all. I think that there has been a breach of this agreement and the plaintiff is entitled to recover damages, and those damages amount to the sum of £294 17 s 3 d as claimed by him.

[His Lordship then held the third party liable to the defendants on similar grounds.]