Buyer Unprotected Against HP Debt When No Money Transfer

When a Volvo truck that was bought on HP was sold to a third party (a company) before the necessary HP payments had been made, the HP company sought to repossess it.



The company refused to return the truck, arguing that it was an innocent buyer in good faith and thus it acquired good title to the vehicle. The Hire Purchase Act 1964 offers protection to innocent buyers of goods with undisclosed HP liabilities.



The company had acquired the truck from the original purchaser in somewhat unusual circumstances. It was owed £45,000 and agreed to buy the truck and set off the debt against the cost. The original purchaser raised an invoice for £89,000 for the vehicle, which was partly paid for by the extinguishment of the debt.



The question before the court was whether the Act provided the protection claimed in these circumstances. The court ruled that it did not, because the onward sale was not a money transfer. In law, taking property in lieu of a debt does not amount to a sale or a contract for sale, and thus cannot constitute a ‘disposition’ (the terminology which applies under the Act).