HPI : Finance Companies Beware
Whilst HPI is never 100% accurate, it is an essential tool that must be used effectively to ensure that clients are as well protected as possible.
Until recently, the leading case was Moorgate Mercantile Co Limited –v- Twitchings . In this case, a finance company failed to register its interest at HPI. An innocent purchaser argued, unsuccessfully, that the finance company was estopped from asserting title by virtue of their failure to use the register. Indeed, the court determined that there was no obligation to register any interest with HPI and a failure to register does not mean the owner loses title.
In April of 2014, the picture evolved somewhat following a judgment handed down by the High Court in the case of Chatfields-Martin Walter –v- Lombard North Central . In this case the defence of estoppel succeeded. Chatfields contracted to purchase a vehicle that was owned by a finance company, namely Lombard, pursuant to a hire purchase agreement. Having noted Lombards’ interest on the HPI database, Chatfields procured a cheque from the vehicle’s seller and delivered it to Lombard. Lombard removed its marker from the HPI register and upon seeing this Chatfields sold the vehicle to a third party.
It transpired that the cheque had not cleared because the cheque was dishonoured. Lombard sued for conversion. Whereas in Moorgate, the finance company did not register its interest at all, Lombard had registered its interest, but subsequently deleted it. Lombard had removed its interest in the mistaken belief that a settlement cheque had cleared, when in fact it had not. Chatfields submitted a defence that the finance company was estopped from asserting ownership in a claim for conversion as it had represented that it no longer had a financial interest in the vehicle. The defence failed at first instance, the judge citing Moorgate, however on appeal, the High Court accepted Chatfields’ argument.
The High Court Judge found that it was not reasonable that a person was unable to rely on the HPI register in a situation where the finance company had themselves altered the contents of the register. The Judge was of the view that dealers and other users of the service would reasonably assume that the information entered or removed by a finance company was accurate.
The court concluded that Lombard had used the HPI service to communicate information about its interest in the vehicle. By removing its financial interest registered at HPI, before the cheque had cleared, Lombard had made an unequivocal representation to those observing the register that it no longer had a financial interest in the vehicle and could not therefore claim damages for conversion.
If a finance company does not make a registration relating to its financial interest in a vehicle at all, then it remains the case that a subsequent purchaser will not be able to rely upon a clear HPI search to argue that he has obtained clean title.
However, if a financial interest is registered against a vehicle by a finance company, and that interest is subsequently removed, the finance company could lose its interest in that vehicle to a third party purchaser who undertakes a prior HPI check which comes back clear. The case of Chatfields demonstrates that the courts are likely to have little sympathy, even when the finance has not actually been settled.
The finance company will of course still have a claim for breach of contract and/or conversion against their original customer for non-payment of the finance. However, this may not be a satisfactory course of action, particularly if there is a question mark over the customer’s ability to pay.