June 2009

Commercial

In this case in December 2008, MILS lawyers defended a motor dealer client in the County Court against a claimant who argued that our client was liable for finance they had defaulted on in respect of a vehicle.

The claimant argued before the judge that since our client had wrongfully asserted a lien over the vehicle they were entitled to stop paying the finance, and that our client was responsible for the outstanding finance when it was subsequently repossessed by the finance company. Our client refuted these claims and with the assistance of MILS Counsel was successful at the trial hearing.

The particulars of the claim were as follows:

The Claimants averred that our client wrongfully interfered with the interests in the Claimant’s trade/business and a Hire Purchase Contract made between the finance company and themselves.

The Hire Purchase Contract aforementioned pertained to a Citroen Van which was hired by the Claimant from the finance company. The vehicle became part of a fleet of five vehicles used by the Claimant. At the time of Hire, the van had 17,378 on the odometer. Around a year later the clutch failed with approximately 40,000 miles on the odometer. The Claimant therefore instructed our client to repair the vehicle, which repair was subsequently undertaken.

After 3,000 miles the new clutch fitted by the Defendant failed, and the Claimant returned the van to our client for repair under warranty. Our client replaced the clutch but stipulated that the repairs were not carried out under warranty since there was a verbal contract for the repair to be carried out privately. The Claimant denied that this was the case and that no instruction was ever given to our client to repair the clutch on a private basis.

Our client therefore held the van on its premises for around five months over which time they repeatedly demanded that the Claimant should pay them and they would release the vehicle.

At the material time, the Claimant was operating on an overdraft, having invested with a view to expand the business. The van was part of the operating fleet which enabled the Claimant Company to carry out income generating work. The Claimant argued that removal of the van therefore reduced the working capacity of the company by 20% and that as a direct result of our client’s withholding of the van, the Claimant was finally forced into making a “commercial decision”, which was to stop payments to the Hirer, since the van could not generate income.

Our client repeatedly rejected the Claimant’s requests to release the vehicle, who sought assistance from the police and finally approached our client with a proposal that they remove the clutch from the vehicle and then return it the van to the Claimant. This was also rejected. Finally, the Claimant issued proceedings although, so the Claimant argued, it was then discovered that our client had handed the van back to the Hirers who had paid for the repair costs, without the Claimant’s knowledge.

At trial in January 2008, the Judge held that our client had unlawfully withheld the van. Judgement was awarded for the Claimant’s claim relating to compensation for loss of use, insurance payments and the Hire Purchase payments which were made whilst our client withheld the van. The judgement was made since the Court accepted that there was no evidence to support our client’s allegation that there was any contract between the Claimant and our client, and therefore there was no reason for the Claimant to have paid them.

The Claimant’s contract with the Hirer allowed the Claimant to have peaceful enjoyment of the van in return for monthly instalments. In turn, the Claimant would be able to continue to use the van for its normal business purpose. Our client was adjudged to have wrongfully interfered with that contract by keeping possession of the van and to have therefore also wrongfully interfered with the interests in the Claimant’s business.

Consequently, the finance company took possession of the vehicle which our client released to them. Under the terms of the Hire agreement the vehicle was auctioned off by the Hirer and the balance of the contract price became due. The finance company issued proceedings for the balance plus their costs. The Claimant therefore sought indemnity for these sums.

Our client argued that that there was nothing stopping the Claimant from paying the repair invoice under protest so the vehicle could be released, and that it was they who chose to stop their finance payments, with the inevitable consequences.

Our client further argued that since title in the vehicle vested in the Hirer at all times, the Claimant must have been served with default notices and that there must have been dialogue between the Hirer and the Claimant regarding the vehicle prior to it being repossessed. Our client had no choice but to release the vehicle as it was the Claimant’s property and they were repossessing it. The Claimant clearly chose to be in breach of contract.

Our client stated that the Court found against them in January 2008 only because the key witness who would have stated that the claimants authorised the repair works was unavailable.

Further, our client denied that they conspired to induce a breach of contract. The Hirer must have been fully aware of the situation with our client’s lien and chose not to pay our client. The Claimant could have mitigated his position, and avoided litigation by paying the outstanding payments under the agreement with the Hirer as they were contractually bound to do.

Our client therefore denied that the Claimant was entitled to the indemnity/contribution sought or costs as claimed or for any sum of money whatsoever and, as stated, the judge found for our client.

If you have any questions or comments relating to these cases, please contact Adam Cox .