Barber v NWS Bank plc

[1996] 1 All ER 906

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Between: NWS Bank plc
And: Barber

Court:

Judges: Kennedy LJ
Peter Gibson LJ
Sir Roger Parker

Subject References:
sale of goods
Conditional sale agreement
Agreement for sale of car
Agreement including clause that seller was owner
Purchaser discovering existence of prior finance agreement in name of a third party with moneys outstanding
Seller aware of prior interest
Whether term in agreement that seller was owner of car a condition entitling purchaser to rescind agreement and recover moneys paid
Whether purchaser took good title

Legislative References:
Hire Purchase Act 1964 - s 27

Case References:
Bunge Corp v Tradax SA - [1981] 2 All ER 513; [1981] 1 WLR 711, HL
Hong Kong Fir Shipping Co Ltd v Kawasaki Kisen Kaisha Ltd - [1962] 1 All ER 474; [1962] 2 QB 26; [1962] 2 WLR 474, CA
Karflex Ltd v Poole - [1933] 2 KB 251; [1933] All ER Rep 46, DC
Warman v Southern Counties Car Finance Corp Ltd (W J Ameris Car Sales, third party) - [1949] 1 All ER 711; [1949] 2 KB 576
Butterworth v Kingsway Motors Ltd, Hayton (third party), Kennedy (fourth party), Rudolph (fifth party) - [1954] 2 All ER 694; [1954] 1 WLR 1286, Assizes
Heaysman's and Tweedy's Contract, Re - (1893) 69 LT 89, CA
Lipkin Gorman (a firm) v Karpnale Ltd - [1992] 4 All ER 512; [1991] 2 AC 548, HL
Mercantile Union Guarantee Corp Ltd v Wheatley - [1937] 4 All ER 713; [1938] 1 KB 490
Rowland v Divall - [1923] 2 KB 500; [1923] All ER Rep 270, CA
Stirrup's Contract, Re - [1961] 1 All ER 805; [1961] 1 WLR 449
Universal Cargo Carriers Corp v Citati - [1957] 3 All ER 234; [1957] 2 QB 401, CA

Hearing date: 10, 11 October 1995
Judgment date: 17 November 1995

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The plaintiff purchased a car from a dealer, K Ltd, for £7,995 under a conditional sale agreement by trading in his existing car to provide an initial deposit of £3,800 and agreeing to pay the balance by instalments to a finance company (the bank) to whom K Ltd assigned the car. The agreement between the plaintiff and the bank provided that the property in the car would pass to the plaintiff on his payment to the bank of the balance of the total cash price and all other sums payable by him, but that until such time the property in the car would remain vested in the bank. The plaintiff paid the instalments as they fell due but before he had paid in full he decided to sell the car, whereupon he discovered that it was the subject of a prior finance agreement with a finance company, M Ltd, on which moneys were outstanding. Inquiries by the plaintiff's solicitors revealed that the bank was already aware of M Ltd's prior interest and had indeed obtained from M Ltd a copy of the prior hire purchase agreement, which showed the hirer to have been C Ltd, a company controlled by the same man who owned K Ltd. The plaintiff wrote to the bank rescinding the agreement on the ground that the bank lacked title, but the bank continued to insist on payment of the amount outstanding, stating that it had now paid M Ltd the moneys owed to it.

The plaintiff issued proceedings against the bank, claiming a declaration that the conditional sale agreement had been validly rescinded and that all moneys paid thereunder should be returned as moneys paid upon a consideration that had wholly failed. On the hearing of a summons issued by the plaintiff for the determination of certain questions of law, the master found in favour of the plaintiff. However, on appeal by the bank, the deputy judge dismissed the plaintiff's claim. The plaintiff appealed. For the purposes of the appeal, the bank accepted that it was an express term of the agreement that it was the owner of the car at the date of the agreement, but contended that the term was not a condition, breach of which would give a right to rescind, but only a warranty or innominate term, breach of which would give only a right to recover proved damages. The bank further contended that it had a defence to liability under s 27(3) ^[F1] of the Hire Purchase Act 1964, by virtue of which, although C Ltd had disposed of the car to K Ltd without having title to it, the plaintiff, as the first private purchaser in good faith without notice, took good title.

Held

(1) Where a conditional sale agreement for the purchase of a car on hire purchase stated that the property in the car remained vested in the finance company until the hirer had paid the balance of the total cash price and all other sums owing, it was an express condition, and not merely a warranty or innominate term, that the finance company was at the date of the agreement the owner of the car. Such a term was not one that admitted of different breaches, some of which were trivial, for which damages were an adequate remedy, and others of which were sufficiently serious to warrant rescission, but was fundamental to the transaction. It followed that if the car was still subject to a prior finance agreement, so that title had not yet passed to the finance company, the purchaser would be entitled to rescind the agreement and recover all the moneys paid under it, notwithstanding that he had had use of the car for a considerable period (see p 911 d to j, p 912 d g and p 913 j, post); Karflex Ltd v Poole [1933] All ER Rep 46 and Warman v Southern Counties Car Finance Corp Ltd (W J Ameris Car Sales, third party) [1949] 1 All ER 711 followed.

(2) Although by virtue of s 27(3) of the 1964 Act the plaintiff might be treated as having taken good title to the car, that did not avail the bank, since s 27(6) expressly excluded a trade and finance purchaser from any exoneration from liability otherwise provided by the section. The bank's liability was therefore unaffected and it would be required to refund the moneys paid under the conditional sale agreement. The plaintiff's appeal would accordingly be allowed (see p 913 f to j, post).

Notes

For criteria for distinguishing between conditions and warranties, see 9 Halsbury's Laws (4th edn) para 543.

For the Hire Purchase Act 1964, s 27, see 11 Halsbury's Statutes (4th edn) (1991 reissue) 4.

Appeal

The plaintiff, Barry William Barber, appealed with leave of Evans LJ from the order of Sir Gervase Sheldon, sitting as a deputy judge of the High Court, on 23 April 1993 whereby he allowed the appeal by the defendant, NWS Bank plc (the bank), and set aside the order of Master Creightmore on 8 March 1993, whereby the master had held in favour of Mr Barber that it was an express and/or implied condition of the conditional sale agreement entered into on 10 October 1989 by Mr Barber (as purchaser of a car) and the bank (as finance company) that the bank was at the date of the agreement the owner of the car, and that since another finance company, Mercantile Credit Co Ltd, had a prior interest in the car at that date Mr Barber was entitled to rescind the agreement and recover all moneys paid under it. The facts are set out in the judgment of Sir Roger Parker.

Cur adv vult