Greg Standing examines the recent case involving Tamara Ecclestone and her ex-boyfriend over the ownership of a luxury Italian sports car.
Finance companies will be familiar with title dispute cases and the principle that ‘no one can transfer a better title in goods than they possess’ – or nemo dat non quod habet.
The High Court has recently dealt with claims of conversion in the high-profile case of Tamara Ecclestone v Khyami and others where ownership of a Lamborghini was at issue.
Khyami alleged that the car had been a gift to him from Tamara. She alleged initially that the car was simply for Khyami’s use during their relationship but that she remained its owner.
A car dealer, Elite, had loaned money to Khyami which had been secured on the car. Elite claimed to be entitled to take possession of the car when the loan was not repaid. Tamara had retained possession of the car following the breakdown of the relationship and had it sent to another garage for servicing.
Elite, which had installed a tracking device in the car, arranged (unlawfully) for bailiffs to take possession of it from the garage. Khyami then lawfully took delivery of the car from the bailiffs and surrendered it to Elite to (part) satisfy his debt. Elite then sold it on to a third party, Ansol.
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Tamara obtained a without notice injunction claiming the car was not a gift to Khyami but belonged to her.
She claimed conversion and delivery up of the car and damages against Khyami, Elite and Ansol. The car was delivered back to her.
Khyami defended the claim on the basis that the car had been a gift to him and he was entitled to deal with it as he had.
Elite defended and counterclaimed contending that the car had been lawfully delivered up to it by Khyami who owed money to it, which was secured upon the car. Possession and title passed to it at that point. Elite claimed damages for conversion against the claimant to include damages for damage to its business reputation due to the adverse press coverage. Ansol defended, claiming delivery up and damages for conversion from either the claimant or Elite.
Tamara subsequently conceded that the car had been a gift. Ownership had in fact transferred to Khyami.
As a result, the High Court dismissed Tamara’s claim for conversion. It held that Khyami was the owner of the car and had been entitled to seek possession of it. A loan agreement was in place between Khyami and Elite securing the loan monies upon the car and Khyami had transferred ownership of the car to Elite by surrendering it to Elite in reduction of the debt he owed. Elite had then transferred title to Ansol.
The injunction obtained by Tamara had been wrongfully granted. She had interfered with possession and title to the car by obtaining possession of it through the injunctive proceedings and thereby interfering with the sale by Elite to Ansol.
Tamara attempted to defend Elite’s conversion claim against her on the basis that it had arranged for bailiffs to take possession of the car unlawfully. Generally, a party cannot be compensated for the consequences of their own criminal conduct.
However, the illegality defence did not apply here as, despite Elite’s serious wrongdoing, that wrongdoing was not the basis upon which it had obtained possession.
Possession had been obtained lawfully, not from the bailiffs but from the rightful owner of the car, Khyami. Elite and Ansol were entitled to damages from the claimant and Ansol was entitled to delivery up of the car.
Things to consider
Here, Tamara had not acted bona fides and knew she had no title to the car when she reclaimed possession of it. She was the party guilty of conversion.
The facts of this case are unusual but are a reminder that finance companies should avoid taking possession of vehicles to which it might have legitimately lost title due to the risk of the finance company being liable for conversion as a result.
Conversion claims most commonly arise in motor finance cases where a customer has ‘disposed’ of the car to a third party, who may or may not be an innocent purchaser of the car in good faith and without notice of the finance company’s interest.
Section 27 of the Hire Purchase Act 1964 applies and title will only pass to a third party when all the conditions of the section are fulfilled.
The finance company should thoroughly investigate the disposal to ascertain whether s27 applies.
In the case of valuable cars at risk of being dissipated, where there are strong prima facie grounds to believe that the disposal was not within s27, injunctive relief should be considered.
Even if title is lost, the finance company still has a claim against its customer for the balance due under the finance agreement, albeit unsecured.
Sadly, most customers do not have the same means as Tamara with which to settle their dues!
Greg Standing is a partner in Wragge & Co’s motor finance litigation team