COURT OF APPEAL, CIVIL DIVISION
LORD DENNING MR, BROWNE AND GEOFFREY LANE LJJ
12, 13 MAY, 18 JUNE 1975
A summary of Moorgate Mercantile Co Ltd v Twitchings [1976] QB 225 (Court of Appeal) follows; the judgment is below.
SUMMARY
Facts of the Case: Moorgate Mercantile Co Ltd was a finance company that leased vehicles. They owned a car that had been hired out under a hire-purchase agreement.
The hirer (a fraudster) sold the car to a motor dealer, who in turn sold it to Mr. Twitchings, an innocent purchaser who bought in good faith, not knowing it was subject to a hire-purchase agreement.
Moorgate Mercantile had not registered their interest in the vehicle on the Hire Purchase Information (HPI) register—a voluntary register used by dealers to check for outstanding finance.
The Claim: Moorgate Mercantile Co Ltd (the finance company) sued Mr. Twitchings, claiming ownership of the car and seeking its return, arguing that title had never passed because the hirer had no right to sell it.
Mr. Twitchings argued that Moorgate Mercantile should be estopped (prevented) from claiming the car because they had failed to register their interest on the HPI system — something most finance companies did to protect dealers and buyers.
Legal Issue: Whether Moorgate Mercantile’s failure to register its interest on the HPI register created an estoppel by negligence, preventing it from reclaiming the car from the innocent purchaser.
Judgment: The Court of Appeal held in favour of Moorgate Mercantile Co Ltd.
Reasoning: The court found that mere failure to register on a voluntary system (like HPI) did not amount to negligence or any representation that the car was free from encumbrances.
There was no duty owed by the finance company to the public or to dealers to register its interest.
Therefore, there was no estoppel preventing Moorgate Mercantile from asserting its ownership.
Outcome: Moorgate Mercantile Co Ltd kept the car.
Mr. Twitchings lost, despite being an innocent purchaser, because the fraudulent hirer had no title to pass. Fault was effectively attributed to the fraudster, not to either party in the case.
Key Principle: A finance company’s failure to register its interest in a hire-purchase vehicle does not amount to negligence or create an estoppel. The true owner retains the right to recover the vehicle, even from an innocent purchaser.
THE JUDGEMENT
The plaintiffs, a finance company, were members of HP Information Ltd (HPI). HPI had been set up by finance companies to give protection against fraud in connection with the hire-purchase of motor vehicles. All the major finance companies were members of HPI; a few minor companies were not members. Approximately 8,000 motor dealers were affiliated members of HPI. About 98 per cent of all hire-purchase agreements relating to cars were registered by finance companies with HPI.
The system operated by HPI was as follows. When a finance company let a car on hire-purchase it immediately sent particulars of the transaction, which included the registration number of the car, on a white card to HPI; a carbon copy of the particulars, on a pink card, was kept by the finance company. White cards sent by finance companies to HPI were filed by HPI. Motor dealers who were affiliated members of HPI purchased from them books of enquiry vouchers, which usually were retained by HPI. When a dealer wanted to know if a car offered to him for sale belonged to the seller or to a finance company he telephoned HPI giving the registration number of the car. HPI searched their files for that number; if there was a white card for the number, the clerk told the dealer that the car was on hire-purchase; if there was no white card for the number, the clerk told the dealer that the car was not recorded as being on hire-purchase; confirmation of the result of the search was sent to the dealer on a slip taken from his voucher book. It was the practice in the motor trade to regard the answer given by HPI as accurate, and a dealer would go ahead with the purchase of a vehicle if HPI stated that the vehicle was not registered with them as being subject to hire-purchase. However, the books of vouchers issued to dealers were subject to the condition that HPI did not accept liability for any action arising out of any information given. The aims and objects of HPI as set out in a booklet for finance companies included the prevention of the wrongful disposal of vehicles on which an unpaid hire-purchase balance was still outstanding and the provision of a source of information to the retail motor trade on vehicles offered to them for sale on which unpaid hire-purchase balances might still be outstanding.
By a hire-purchase agreement dated 26 July 1971 the plaintiffs let a car on hire-purchase to M. Under the hire-purchase agreement M paid £320 in cash, the balance of the hire,£605, being payable by 24 monthly instalments of £25·24. It was the plaintiffs’ practice to register all their hire-purchase agreements with HPI and the plaintiffs held out HPI as the proper person to whom enquiries could be addressed in relation to the plaintiffs’ transactions. By some mistake the white card containing the particulars of the hire-purchase agreement with M and the pink carbon copy of it, both of which had been prepared by a member of the plaintiffs’ staff, were mislaid and the white card never got into the file of HPI It was probable that both the white and pink cards had been mislaid in the plaintiffs’ office although it was not proved that the plaintiffs had been negligent; it was possible that the cards had been mislaid by the Post Office or by HPI.
In November 1971 M offered the car for sale to the defendant, a motor dealer who was an affiliated member of HPI. M told the defendant that the car was not subject to any hire-purchase agreement and stated that he was the owner. The defendant’s son telephoned HPI on the defendant’s behalf and enquired whether any hire-purchase agreement had been registered with HPI relating to the car. The clerk at HPI searched the files and gave the answer that the car had not been registered with HPI as being subject to any hire-purchase agreement. Written confirmation of that answer was sent to the defendant on a voucher from the defendant’s voucher book. As a result of the answer given by HPI the defendant bought the car from M for £525.
Soon after the car was resold to a private person. M paid four instalments of hire to the plaintiffs to keep them quiet but he did not pay any further instalments. Some time later the plaintiffs discovered that the car had been sold. They sued the defendant for damages for conversion of the car. The amount of the instalments outstanding on the hire purchase agreement with M was £479·56.
Held (Geoffrey Lane LJ dissenting)– The plaintiffs’ claim failed since they were estopped from asserting their title to the car against the defendant for the following reasons—
(i) (per Lord Denning MR) Where an owner had entrusted his property to the care of another person and by his conduct that person had, albeit unintentionally, led a third party to believe that the owner had no title to the property, or that his title was limited in some way, and the third party had acted in reliance on that belief, the owner would be estopped from asserting his title against the third party if it would be unjust or inequitable to allow him to do so. It followed that, since the plaintiffs had entrustedHPI, an organisation set up for the very purpose of supplying information about hire-purchase transactions, with the task of answering enquiries about the plaintiffs’ hire-purchase transactions, the plaintiffs were responsible for the answer given by HPI to the defendant that the car was not subject to any hire-purchase agreement, regardless of whether blame for the failure to register M’s agreement was attributable to the plaintiffs, the Post Office or HPI. The defendant had been led by HPI’s answer to believe that the plaintiffs were not the owners of the car, and had acted on that belief. Accordingly it would be inequitable to allow the plaintiffs to depart from what they had led the defendant to believe (see p 323 d to h and p 324 d e and h to p 325 b, post); dicta of Atkin J in Attorney-General to the Prince of Wales v Collom [1916] 2 KB at 203 and of Devlin J in Eastern Distributors v Goldring [1957] 2 All ER at 529 applied.
(ii)(per Browne LJ) The effect of the setting up, the organisation and the method of operation of HPI was such that the plaintiffs and other finance companies were to be treated as having made HPI their agents to answer on their behalf enquiries from dealers. The statement made by HPI to the defendant that the car had not been registered with them amounted to an express representation on behalf of the plaintiffs that none of the finance companies who were members of HPI, including the plaintiffs, had any interest in the car under a hire-purchase agreement since dealers in the trade would understand the statement to have that meaning. It followed that, in consequence of the representation, the plaintiffs were estopped from assertingtheir title since HPI and the finance company members intended dealers to act on answers given by HPI as being correct; by buying the car the defendant had acted on HPI’s statement that the car was not subject to a hire-purchase agreement; the statement was untrue and it was irrelevant whether that was because of a mistake made by the plaintiffs, the Post Office or HPI; by acting on HPI’s statement the defendant had acted to his detriment by buying a car which the seller had no title to sell. It was immaterial that there had been no negligence on the part of the plaintiffs or HPI for, where there had been an express representation, negligence was not a necessary element to found an estoppel. Furthermore the exclusion of liability by HPI as a condition of issuing vouchers to dealers was to protect HPI from liability and did not affect the plaintiffs’ position (see p 326 d to g and p 327 b to d and g to p 328 c, post).
Per Lord Denning MR (Geoffrey Lane LJ dissenting, Browne LJ dubitante). The plaintiffs were under a duty of care to the defendant and other dealers to register the transaction with HPI because the plaintiffs knew, or ought to have known, that dealers would rely on what the plaintiffs told, or failed to tell, HPI. Although a breach of that duty would only result in economic loss such loss would, in the circumstances, be recoverable. No breach of duty had, however, been proved against the plaintiffs (see p 321 c and d, post).
Per Lord Denning MR. (i) Any finance company, exercising ordinary care, ought to adopt the usual method of protecting its property, ie by becoming a member of HPI If it does not do so, it may find itself estopped from asserting its title against an innocent buyer or seller (see p 325 c and d, post).
(ii) Estoppel by negligence is only one aspect of estoppel by conduct. Negligence, even the most culpable negligence, is no ground for depriving an owner of his goods.
Appeal
This was an appeal by the defendant, Alfred Twitchings, against the judgment of his Honour Judge Dow, sitting at Clerkenwell County Court, given on 22 March 1974, whereby he entered judgment for the plaintiffs, Moorgate Mercantile Co Ltd (‘Moorgate’), in the sum of £479·56 on their claim against the defendant for damages, limited to £750, for conversion of a motor car. The facts are set out in the judgment of Lord Denning MR.