Asset Finance: No Defence when Excavator sold out of Trust

We recently succeeded in full in a claim for damages for conversion on behalf of a financier which raised the apparently novel point of whether a large Excavator fell within the definition of “motor vehicle”.

In De Lage Landen Leasing Limited t/a Hyundai Construction Equipment Europe Finance v Dring (Manchester Circuit Commercial Court 13 July 2022) both parties were the victim of a fraudulent disposition of the Claimant’s Excavator by the Hirer and/or an associated company.

The Excavator was the subject of a Hire Purchase Agreement and was purportedly sold on to the Defendants who ran a Hire business themselves and acted completely in good faith.

Unfortunately the Hirer and its associated company were insolvent, so the Defendants were vulnerable to a claim for damages for conversion, although the Claimant volunteered to reduce its claim down from the value of the Excavator at the time of its purported purchase by the Defendants to the lesser amount of the termination sum which would have been due from the Hirer.

The Claimants applied for summary judgment on the grounds that there was no defence to the claim, and at the hearing the Defendants sought to rely on the protection granted to private purchasers in a sale out of trust in some circumstances under section 27 of the Hire Purchase Act 1964.

We successfully defeated this argument on the grounds that “motor vehicle” is defined in section 29 (1) of that Act as:

“a mechanically propelled vehicle intended or adapted for use on roads to which the public has access.”

 It was clear from a picture of the Excavator in question that it was an enormous object on tracks with a very large lifting arm, and the Defendants argued:

(1)      it was used for building roads so fell within the definition on that basis;

(2)      alternatively although it was normally on tracks, it could be adapted to travel along roads.

The judge HH J Pearce agreed with our submissions that this analysis was not correct, the fact that the Excavator was used to build roads did not bring it within the definition because those roads would not at the time be subject to public access, and the fact that the Excavator could be adapted to travel along roads did not mean that it was intended or adapted for that purpose.

In argument we also referred to the example of a tractor as something which whilst often seen on roads, was not intended or adapted for that purpose, as opposed to use on farms at either side of a road which it may have used in transit, and the judge commented that that is perhaps an argument which can be had on another day but as far as the particular Excavator in the present case was concerned he was satisfied that our submissions were correct.

Contact Bermans Asset Finance team