A substantial motor fraud in South Wales has left over 30
finance companies facing losses, while consumers face repossession
of new cars which they thought they had purchased outright for
cash.
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At the centre of the deals is a company called Gwent Fleet
Management Ltd (GFM). Currently being wound up insolvent, GFM had
traded as an independent car dealership.
Over a period of time, a number of fraudulent deals were placed
through GFM. Many of the consumers were based in the same region as
GFM, with others introduced through various channels, including the
BuyNewCars4Less internet brokerage, which is not itself suspected
of malpractice.
To the customers, GFM effectively acted as a resale broker. It
purchased new cars from various other dealers who held franchises
with the manufacturers, to the orders of customers who were offered
attractive prices.
Where customers paid cash to GFM, however, the cars were
simultaneously sold to finance companies. They wrote leases or hire
purchase (HP) assignments to GFM, apparently on the understanding
that they were funding a contract hire business.
Other customers sought point-of-sale finance. GFM took cash
deposits and trade-in cars from them, and arranged HP deals through
finance brokers. However, the HP advances received by GFM were not
passed on to the franchised dealers, who therefore did not release
the new cars to the customers.
For a time GFM kept up its rentals and HP instalment payments,
while fulfilling some of the customers’ new cars orders.
Eventually, however, GFM went into arrears with the finance
companies.
Consumers, who thought they had purchased their cars for cash
through a dealership, then faced bailiffs trying to repossess them
for the finance companies. The fraud then came to light and a
police investigation is now focused on GFM’s managing director
Brian John Webb.
Detective Constable David Nisbet of Gwent Police said: “A man
has been arrested and released on police bail. A criminal
investigation is ongoing and we are working closely with local
authority trading standards officers.”
Title disputes
Meanwhile disputes drag on between private car buyers and the
finance companies as to who has good title to those cars which were
delivered. These could result in civil litigation. 
Melanie Chell, partner at HBJ Gately Wareing which acts for
several of the finance companies, comments: “The outcome of title
claims will vary according to the circumstances in each case. The
general legal principle of ‘nemo dat’ – i.e. that one cannot
perfect an onward sale of what one does not own – has various
exceptions. The use of those exceptions will depend totally on the
facts of each case”.
Chell added: “In most cases the finance companies hold good
title to the vehicles. GFM was not, at the point of sale to the
consumer, a ‘debtor’ under an HP agreement. GFM commonly entered
into finance agreements at a later date. Further, GFM never had
either possession or title. The cars were delivered direct from the
franchised dealers to the purported private buyers, who made their
payments to GFM. The local County Court in Pontypridd could be
overwhelmed with possession and title cases.”
One finance company representative commented: “Where cars
ostensibly in GFM’s contract hire fleet were funded on HP, the
statutory ‘innocent private purchaser’ rules [see p20] come into
play. In a few cases where the new car prices were unbelievably
low, or, more commonly, agreed trade-in prices were incredibly
high, we have to ask whether customers were acting in good
faith.”
Estimated amounts owing to finance companies on the purported
contract hire fleet have been disclosed in a GFM directors’ report.
The list is headed by a local independent finance company, Family
Finance Ltd in Tredegar, but includes many of the national players
in motor finance. Most of them appear to have financed up to three
cars each.
It is possible that the finance companies’ losses could rise as
high as £5m or more, allowing for the other cases where customers
had sought finance and GFM retained sums due to be passed to the
franchised dealers. In the light of other liabilities and assets
shown in the directors’ report, it seems that unsecured creditors
may not realise large recoveries. The directors’ report states that
Webb expects to be made bankrupt as a result of personal guarantees
to GFM creditors.
