Lombard & Ulster Banking v Mercedes - Benze Finance Ltd
| Jurisdiction | Ireland |
| Judge | Mr. Justice John MacMenamin |
| Judgment Date | 11 January 2006 |
| Neutral Citation | [2006] IEHC 168 |
| Court | High Court |
| Docket Number | [No. 6424 P/1999] |
| Date | 11 January 2006 |
[2006] IEHC 168
THE HIGH COURT
BETWEEN
AND
FIBROSA SPOLKA AKCYJNA v FAIRBAIRN LAWSON COMBE BARBOUR LTD 1943 AC 32
ROWLAND v DIVALL 1923 2 KB 500
CHARTERED TRUST IRELAND LTD v HEALY & COMMINS UNREP CIRC APP BARRON J 10.12.1985 1986/1/273
UNITED DOMINIONS TRUST (IRL) LTD v SHANNON CARAVANS LTD 1976 IR 225
LEVETT v BARCLAYS BANK 1995 2 ALL ER 615
LOWIS v WILSON 1949 IR 347
ONTRACT LAW
Hire purchase
Hire purchase transaction - Consideration - Failure to disclose material facts - Breach of material conditions - Whether total failure of consideration - Whether plaintiff entitled to rescind contract - Relief granted (1999/6424P - MacMenamin J - 11/1/2006) [2006] IEHC 168
Lombard and Ulster Banking Ltd v Mercedes-Benz Finance Ltd
The plaintiff agreed to provide financing to the second named defendant for the hire purchase of three trucks from the first named defendant (the defendant). Consequently, the plaintiff effected a credit transfer to the defendant. The plaintiff was not advised that the second named defendant had previously failed to honour a hire purchase agreement with the defendant in relation to the same trucks and was in fact still in possession of two of the trucks. Subsequent to the credit transfer, the defendant called upon the plaintiff to ensure the totality of the payment of the transaction, including payment of the deposit and further asserted a retention of title clause.
Held by MacMenamin in favour of the plaintiff: That the plaintiff was entitled to assume that the defendant was the owner and in possession of the three trucks in question. However, the defendant was not the rightful owner of one of the trucks and was not in possession of the other two trucks. There was a clear failure of disclosure of material facts and a breach of material conditions in this case and consequently, this was a contract where the consideration had wholly failed and therefore the plaintiff was entitled to recession.
Reporter: L.O’S.
It might well have been thought in this era of mediation and alternative dispute resolution that an action between two substantial finance houses regarding the financing of a hire purchase transaction of three rather elderly second hand Mercedes tractor truck units would be more redolent of litigation of another era; the more so when the sum originally at stake was just in excess of the lower end of the High Court money jurisdiction. The fallacy of such a presumption is demonstrated by the instant case which was fought out with tenacity and vigour over three days in the High Court. The reasons therefor emerge in the course of this judgment. Put simply, each side firmly believed in the moral and legal correctness of their actions. (For ease of reference in this judgment Mercedes-Benz Finance Ltd will (save in the next paragraph) be hereafter be referred to as “the defendant”).
On one view, the relevant events in issue can be measured in a two month time-span. In or about August 1998 Vincent Hughes, the second named defendant (who is no longer concerned in these proceedings), approached the plaintiffs and stated that he wished to buy three second hand Mercedes trucks from the first named defendant in England and wished to obtain finance of STG £40,000 for this transaction. In the ordinary way the structure of the finance would be a series of three hire purchase agreements, one in respect of each of the three trucks.
The contract was made between the plaintiff and the defendant. The transaction was handled in the plaintiff company by Aidan Carolan. At the time of this transaction he was a Manager of the plaintiff company in its Cavan branch. He is now Area Manager in the same branch. He testified that in August 1998 he received a telephone call from a salesperson in Westwood Garage in Strokestown to the effect that the second named defendant was minded to purchase one single new Scania truck from that garage. Mr. Carolan went to meet Mr. Hughes. The nature of this transaction was to be a hire purchase agreement. It is unnecessary to deal any further with this transaction as it did not proceed.
Mr. Carolan testified that he personally had no previous experience of dealing with Mr. Hughes. Mr. Hughes had however engaged in transactions with Lake Leasing who are an associated company of the plaintiff. While the latter company carry on their own leasing business, Lombard and Ulster Finance collect funds on their behalf by way of direct debit. The plaintiffs do not share the same information and databanks as Lake Leasing.
A short period later Mr. Carolan received a further telephone call from a sales executive of Lombard and Ulster in Sligo. That executive was Gareth Heavey. Mr. Heavey informed Mr. Carolan that Mr. Hughes was then purchasing three second hand Mercedes trucks from Mercedes in England and that this information had come to him through Lake Leasing. Lake themselves were not in the business of financing trucks. Their main business related to the financing of cars. Mr. Carolan's understanding was that Lombard and Ulster would be dealing with Mercedes Benz Sales. He contacted Mr. Hughes and asked him about his intentions. He was informed that Mr. Hughes was purchasing three trucks from Mercedes Benz. As Mr. Carolan was going through Carrick-on-Shannon (where Mr. Hughes lives) he stated that he would call to see him. At that meeting Mr. Carolan was told that Mr. Hughes was purchasing three trucks for a total value of approximately STG £62,000 and that he required finance of STG £40,000 from the plaintiffs and that he wished to pay the deposit.
Mr. Carolan knew no more about the trucks at that stage. He put the proposal forward to his head office and the arrangement was approved in principle.
The next step in the transaction was to seek a pro forma invoice from the defendant. Mr. Carolan contacted a Mr. Kevin Segar in that company. He told Mr. Segar that Mr. Hughes was purchasing three trucks from the defendant and that he wished to obtain an invoice. The plaintiff was going to finance the purchase. Mr. Segar indicated that he would arrange for a draft invoice which he did. Mr. Carolan testified that he informed Mr. Segar that the plaintiffs were to finance STG £40,000. The total consideration for the three trucks was STG £62,667.56. In error Mr. Segar sent an invoice to Mr. Carolan dated 11th September for the sum of £64,667.56. It will be seen therefore that the error was in the sum of an additional sum of STG £2,000.
To avoid further confusion Mr. Carolan laid out a draft invoice as the plaintiffs would require it. He forwarded this to a Stuart Lowther in the defendant company to make up the invoice. Mr. Carolan stated that he was not surprised to find that the seller of the trucks was Mercedes Benz Finance Ltd (a UK Company) rather than Mercedes Benz Sales Ltd. This was attributable to the fact that the plaintiffs financed trucks and various pieces of equipment which might have been repossessed by finance companies such as the defendant. Equally the defendant could wish to sell contract hire vehicles which had been repossessed. Such a transaction therefore, even from the defendant which is a United Kingdom registered company would not be uncommon. Ultimately, on 14th September an invoice emanated from the defendants. The only distinction which can be seen on the face of the draft as opposed to the actual sales invoice of 14th September was the sequence in which the trucks were dealt with, and some lack of definition to the valuation figures which were attributable to each of the three trucks. Mr. Hughes signed the hire purchase contract on the requisite form for the transaction on 15th September. Mr. Carolan contacted a sales support person in the plaintiffs Dublin office to carry out a credit bureau check, known as an “ICB check” to ascertain whether the goods were the subject of any hire purchase or loan agreement. Nothing adverse was disclosed. Thereafter Mr. Carolan instructed the plaintiff's head office to carry out the credit transfer of STG £40,000 to the defendant company.
No information was disclosed to the plaintiff, nor did any discussions take place between Mr. Carolan and the defendant as to the provenance or whereabouts of the trucks. Mr. Carolan said that he proceeded on the basis that they were in the possession of the defendants, and in storage in England.
The sales invoice relating to the three trucks from the defendants contained a number of terms which are of importance. The first of these was: "no warranty given or implied". The second: "any distance recorded on the above vehicle cannot be guaranteed in any way". The third: "as seen and approved by Mr. V. Hughes". Finally it was stipulated: "all goods remain the property of the vendor until cleared or received in full". The total consideration of STG £62,667.56 was set out. Below that there was recited: "less cash deposit due from Mr. Hughes STG £22,667.56", leaving a balance due of STG £40,000.
On its face then, this is a relatively straightforward hire purchase transaction conducted perhaps rather too speedily and certainly informally.
In order to obtain a fuller picture one must then turn to the history of the tractor truck units. Each of them had previously been registered in Northern Ireland. The oldest was previously registered OJI5287. It chassis number was WDB65592. It was the subject matter of a hire purchase agreement made between Mercedes-Benz Finance Ltd and Agnew Commercials, a Northern Ireland concern on 30th March, 1996. The cash price paid for the vehicle was STG £23,500. This was financed as to an initial...
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