To what extent is a financier’s application for delivery up of leased goods likely to be defeated by a hirer’s invocation of the court’s discretion?
The use of interim applications for delivery up of equipment on finance has been greatly curtailed since the moratorium imposed by the Insolvency Act 1986 has afforded protection to companies in administration, but such applications remain relevant outside the insolvency context.
A recent example with somewhat unusual facts arose in the case of Dawsonrentals Coach & Bus Ltd v Geldards Coaches Ltd  EWHC 2596 (QB). Here the claimant leased 27 vehicles to the hirer which were used for local authority school transport. The hirer was in arrears and resisted an interim application for delivery up on the basis that the schools were unaware of the situation and would be unable to obtain alternative vehicles before the end of term, which was about two weeks away. The hirer therefore sought to delay any order for delivery up for a period of a further two weeks, whilst the claimant insisted on delivery the next working day.
The judge referred to previous authority defining the nature and scope of the court’s discretion in an application for interim delivery up where there is no real legal defence to the claim: –
“The claimant, Dawsonrentals, must have a arguable case, but, as was set out in the decision of sir Robert Megarry as Vice Chancellor, a decision of 14 March 1980, Howard E Perry & Co Ltd v British Railways Board 1 WLR  1375 , there need not be any urgency or any risk of danger of loss or disruption. At page 1384 of his judgment, these two passages are of relevance. At letter E he says:
“Do these fears of the defendants, either individually or collectively, provide a sufficient ground for the court in its discretion to refuse to make the order for delivery which otherwise ought to be made in favour of the plaintiffs? Ought the court to be persuaded from making an order against a litigant if that litigant has been threatened with unpleasant consequences if he does what the order requires him to do?”
Then he goes on to say at letter G:
“There may be cases in which other respects the scales are only barely tipped in favour of making the order and the damaging effect of the threats are so great that the court may then refrain from making the order. But, apart from cases such as these, I think the court ought not to allow threats to a litigant and the litigant’s fears of those threats to dominate the decision.”
A concern with regard to the reputation of a company or its ongoing ability to trade does not in itself give rise to a reason as to why the order should not be made”.
The court then weighed up the competing contentions and interests of the parties, and ruled that there would be a further grace period of about a week before delivery up of the vehicles would be ordered so that the hirer could inform the school authorities, who would hopefully have time to arrange replacement transport.
The advent of the insolvency moratorium has led to a dearth of reported cases on interim applications for delivery up, but this case restates established principles that at the end of the day the court always has a discretion before ordering interim delivery of financed assets, and in exceptional circumstances such discretion may take into account the interests of innocent third parties.Continue Reading