James BairdHire
Purchase Act used to help consumer purchaser win title from


The Court of Appeal in Kulkarni vs
Manor Credit (Davenham) Ltd
has overturned a first instance
judge and decided that in the circumstances of the case, title to a
car passed on delivery and not before.

It also allowed a consumer purchaser (Dr
Kulkarni) to acquire title from a seller (Gwent) which had no title
to the vehicle, by relying on Section 27 of the Hire Purchase Act
1964 (as amended) (see timeline, below).

The question for the court of appeal was
whether Kulkarni was a so-called “innocent purchaser” under s27 of
the Act.

The section states:

(1) This section applies where a motor
vehicle is bailed under a Hire Purchase agreement and before
property in the vehicle has become vested in the debtor, he
disposes of the vehicle to another person.

(2) Where the disposition referred to
in Section (1) is to a private purchaser, and he is a purchaser in
good faith, without notice of the hire purchase agreement that
disposition shall have the effect as if the creditors title to the
vehicle has been vested in the debtor immediately before that

Section 29 (1) of the Act defines disposition
as any sale or contract of sale including any bailment under a hire
Purchase agreement.

Therefore, was Gwent a debtor under the
Agreement at the time of the relevant disposition of the vehicle to
Kulkarni so as to fall within s27 of the Act?

To answer this question, the court looked at
when there was a contact of sale/disposition. Kulkarni first
entered into an agreement to buy a vehicle on 3 March 2008 but at
that stage did not know of the vehicle’s actual identity as it had
to be sourced.

Kulkarni argued that the actual sale had taken
place not when he paid the monies to Gwent but only when the
vehicle was delivered to him on the 14 March 2008 which was after
or at the same time there was a debtor (Gwent) under the agreement
with Manor Credit.

The reasoning of the court was technical but
hinged on the intention of the parties as to when title to the
vehicle was intended to pass.


The court’s decision

The court held that when Kulkarni ordered a
vehicle it was unascertained goods and only once the identifying
marks of the vehicle became known did it become certain which
actual vehicle he was to buy.

Once the vehicle had been identified and
ascertained, there needed to be an unconditional appropriation of
the vehicle to the sale agreement together with the assent or
consent of Kulkarni, who could not validly assent/consent he did
not know that Gwent did not have title in or own the vehicle.

The vehicle also had to be in a “deliverable
state” which the court defined as meaning with number plates
attached to it, as without them Kulkarni could not drive the
vehicle on the road.

The court decided that the latest when a sale
or disposition took place was at the time of delivery of the
vehicle and at that time Gwent while not owing the Vehicle was a
debtor under the Agreement with Manor Credit and thus Kulkarni
could rely on s27 of the Act, which the trial judge said he could

The court’s reasoning shows that it fully
supported a consumer purchaser in this instance and placed the risk
of fraud at the door of the innocent finance company.

The author is an asset
finance partner at the law firm HBJ Gateley Wareing