Clarify section of the Hire Purchase Act

Question

can someone let me know if i'm reading this correctly.

Is point 2 stating that if I purchase a vehicle from a private seller, and he/she does not inform me that the vehicle is subject to a hire purchase agreement, then the title of the vehicle still goes to me? As I purchased this vehicle in good faith, and wasn't informed.

Some of the terminology trips me up: disposition: the act of the sale? debtor: the finance company?

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Section 27

Protection of purchasers of motor vehicles.

1. This section applies where a motor vehicle has been bailed or (in Scotland) hired under a hire-purchase agreement, or has been agreed to be sold under a conditional sale agreement, and, before the 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 subsection (1) above is to a private purchaser, and he is a purchaser of the motor vehicle in good faith without notice of the hire-purchase or conditional sale agreement (the “relevant agreement”) that disposition shall have effect as if the creditor’s title to the vehicle has been vested in the debtor immediately before that disposition.

https://www.legislation.gov.uk/ukpga/1964/53

Answer 1

The new buyer (ie purchaser) gets the car and title, and the seller (ie debtor) retains the HP debt with the finance company (ie creditor).

Under a Hire Purchase/Conditional Sale agreement the finance company generally own the car until the end of the finance agreement. If a person has the vehicle on such a finance agreement then sells it to a private and innocent purchaser the purchaser gets good title to the car. The only recourse the finance company has is against the person who had it on finance or any of the trade buyers/sellers in between.

http://www.lawgistics.co.uk/legal-article-business-law/motor-trade-advice/special-rights-to-customers-buying-cars-subject-to-hire-purchase

Answer 2

I won't address the points already mentioned in this answer other than to mention that you can find statutory definitions of "disposition", "debtor", and other relevant terms at section 29 of the Act.

I would add that your interpretation is not entirely accurate: "he/she does not inform me that the vehicle is subject to a hire purchase agreement, then the title of the vehicle still goes to me? As I purchased this vehicle in good faith, and wasn't informed".

The mere fact of not being informed isn't by itself sufficient and does not automatically imply good faith. For example, if you had good reason to suspect there was a hire purchase agreement and you went ahead anyway then you wouldn't be acting in good faith even though the seller didn't inform you.

To satisfy the requirements of the act you need to meet all three elements:

1. You are a private purchaser.
2. You purchase in good faith.
3. You are without notice of the relevant agreement.

It has been held that the term "good faith" in section 27 can be equated with the usage of the term in the Sale of Goods Act 1979 s. 61(3) and the Bills of Exchange Act 1882 s. 90 - Dodds v Yorkshire Bank Finance[1992] 1 WLUK 88. The Sale of Goods Act provides that: "a thing is deemed to be done in good faith within the meaning of this Act when it is in fact done honestly, whether it is done negligently or not.". So it doesn't matter whether you were careless in not realising there was a hire purchase agreement.

As a side issue, you can't rely on section 27(2) if the seller's relevant agreement with the creditor was obtained fraudulently (regardless of if you satisfy the three elements above). This is because the requirements of 27(1) are not met as there effectively is no such agreement (it is a nullity) - Shogun Finance Ltd v Hudson [2003] UKHL 62.