HIRE PURCHASE OF MOTOR VEHICLES (Hansard, 22 February 1961)

§ Mr. Fergus Montgomery (Newcastle-upon-Tyne, East)

I beg to move, That leave be given to bring in a Bill to ensure that hire purchase contracts are endorsed on the registration books of all motor vehicles subject to such contracts. This is rather a legal matter and as I am not a member of the legal profession I hope that if, perhaps, my legal phrasing is not all it should be the House will be patient with me.

The object of my proposed Bill is to close a loophole in the law with regard to vehicles bought under a hire-purchase agreement. During recent years it has often occurred that a hirer of a motor vehicle purports to sell it for cash to a purchaser without disclosing the existence of the hire-purchase agreement. The vendor is guilty of a criminal offence for which he can be imprisoned, but that is little compensation to the purchaser of the vehicle, because he may be sued by the true owner, in other words, the hire-purchase company, for the return of the vehicle or for the balance outstanding under the hire-purchase agreement.

Legally, it is no defence to the purchaser that he purchased a vehicle in good faith and without notice of the rights of the true owner. The purchaser's only remedy at law is to sue the vendor for the return of his money. In practice, this right of action is of little avail, because the vendor is, in all probability, in prison and almost invariably without the necessary financial means to satisfy the judgment.

This unsatisfactory state of affairs was brought to my notice by legal friends of mine in Newcastle and in subsequent investigations I have discovered that there is a widely held view within the legal profession that the existing state of the law is unsatisfactory from the point of view of an innocent purchaser.

Only two weeks ago my hon. Friend the Member for Swansea, West (Mr. Rees) had this state of affairs pointed out to him by members of the legal profession in Swansea. To give point to the widespread occurrences of this practice, I am informed that in Swansea alone there have been 18 cases recently. It is, therefore, to prevent this situation 510 from arising that I seek leave to introduce this Bill today.

The proposed Bill is entitled, "Hire Purchase of Motor Vehicles: Bill to ensure that hire purchase contracts are endorsed on the registration books of all motor vehicles subject to such contracts", and its provisions are threefold. First, to make it the responsibility of the lawful owner of a motor vehicle, who is not also the person registered with the local authority as the person keeping the vehicle, to endorse a note of his interest on the registration book which is in the possession of the hirer. Secondly, to provide that if the owner fails to carry out this obligation his rights should be of no avail against a bona fide purchaser for value without notice of the owner's interest. Thirdly, to require the local authority to maintain a register of the lawful owners of all motor vehicles.

No doubt there are arguments which may be advanced against the Bill, and three arguments which spring to mind I intend to deal with now. First, it may be said that the hirer may object to publicity being given to the fact that his vehicle is subject to a hire-purchase agreement. This is, to my mind, a somewhat old-fashioned argument, particularly in view of the tremendous increase in hire-purchase business in recent years. In any case, the hirer is obliged to produce the registration book only to the local taxation office and to a prospective purchaser of the vehicle. If he shows the book on any other occasion, then that is his own affair.

Secondly, it may be said that the purpose of the registration book is to facilitate the collection of Excise duties and not to act as a document of title. Certainly, I would agree that the primary use of the book is for Excise purposes, but is that a valid reason for saying that a secondary use should not be introduced? Indeed, there is a precedent to this, because the issue of supplementary petrol coupons was recorded on the book in the days of petrol rationing. I would also point out that there would be no need for any change in the layout of the registration book. There is ample space on page 3 which is not now used. The left-hand column could be used to record the commencement of a hire-purchase agreement and the right hand 511 column to record the termination of the agreement.

Thirdly, I suppose that the hire-purchase companies may object to being obliged to undertake extra clerical work, but if the Bill should become law then they would spend less time tracing and recovering vehicles which their hirers had purported to sell. The companies would also not suffer from the ill will created through the forced recovery of a vehicle from an innocent purchaser.

I believe that the existing state of the law is highly unsatisfactory in that it makes this particular type of fraudulent conduct by hirers so easy. Therefore, I believe that the proposals embodied in the proposed Bill are doubly beneficial in that they will help to prevent a potential criminal from committing an offence, and, at the same time, protect an innocent purchaser from suffering financial loss.