No HPI registration? No problem
Although it is standard practice for finance companies to
register their interests on the HPI register, the case of
Industrial & Corporate Finance Ltd v Wyder Group Ltd confirmed
that there is no legal duty to do so, and failure to do so will not
amount to a defence to a claim for conversion.
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In this
case, the owner of three motorbikes assigned them, by way of bill
of sale, to the claimant finance company. The claimant thereby
acquired good title to the bikes although possession remained with
the original owner. He defaulted on the terms of the bill of sale
and the claimant sought possession of the bikes. However, the bikes
had in fact been sold on to the defendant, who in turn had sold
them on again. The claimant brought proceedings against the
defendant for conversion pursuant to s21(1) of the Sale of Goods
Act 1979 (SGA).
S21 SGA provides that where goods are sold by a person who is
not their owner and who does not sell them under the authority or
with the consent of the owner, the buyer acquires no better title
to the goods than the seller had. Here, as the seller had no title,
the defendant had no title to acquire and so no right to sell the
bikes on.
The defendant’s case was that the claimant should not be able to
assert its title. As all reputable dealers do, the defendant had
carried out HPI checks on the bikes. Those checks were clear as the
claimant had not registered its interest. It was alleged that as it
is industry practice for finance companies to register their
interests at HPI and industry practice for dealers to check the
register is clear before acquiring a vehicle, the defendant could
have done no more than it did to protect itself, whereas the
claimant could easily have done more.
In granting summary judgment for the claimant, the court
confirmed that although it was the practice for finance companies
to register agreements with HPI, there was no duty on them to do
so. Failure to do so could not amount to a defence to a claim in
conversion. The defendant was therefore liable in conversion.
Although there is no duty to register at HPI, there are strong
commercial reasons for doing so and most finance companies will
register to flag their interest on vehicles to others. Inevitably,
sometimes this is overlooked. This case confirms that the failure
to register will not prejudice the finance company, as set out in
the earlier House of Lords authority of Moorgate Mercantile Co v
Twitchings.
UPDATE: A “u-turn” on the proposed
pre-action protocol
In June, I commented upon the Civil Justice Counsel’s (CJC)
proposals for a new general pre-action protocol which would cover
all claims not otherwise covered by an existing pre-action
protocol. Due to the majority of the responses to the proposals
being negative, the CJC has now decided not to recommend the
introduction of such a protocol.
Greg Standing, a partner in Wragge & Co
LLP’s Finance, Insolvency, Recoveries and Sales team
