Motability Finance Ltd.

HC Deb 20 June 2000 vol 352 cc36-44WH 12.30 pm

Mr. Patrick Nicholls (Teignbridge)

I am grateful to have this opportunity to draw to the attention of the House the rather curious case of Walter Kernick of Kingskerswell and his N-registered Ford Escort car. At first sight, it may not seem to be the most weighty matter ever to have been debated in the House of Commons, but once I have described the circumstances of the case, hon. Members will appreciate that it was difficult to see how else I could bring the matter to a satisfactory conclusion. I have a long and tedious tale to tell of the incompetence of Motability Finance Ltd. in its dealings with Mr. Kernick and me.

In September 1996, Mr. Kernick bought his car from Mr. and Mrs. Johnson of Newton Abbot. Last spring, almost three years after buying the car for £7,500, Mr Kernick took the car to a Ford main dealer with a view to part-exchanging it for another car. The dealer did the usual checks and discovered that the car was owned by Motability Finance. That was the first time that Mr. Kernick had any reason to think that there was anything untoward about the transaction with the Johnsons. He bought the car in 1996 in good faith; he did not know that Mrs. Johnson had obtained the car through a hire agreement with Motability Finance.

Any first-week law student would know—anyone who was old enough to vote might know—that one is not entitled to something that was bought on finance. The matter was therefore referred to the Devon and Cornwall constabulary, which wrote to me in due course to say that, although the sale of the vehicle appeared to indicate theft of the vehicle by Mrs. Johnson, the Crown Prosecution Service was of the opinion that there was insufficient evidence to show that at the time of the transaction Mrs. Johnson had carried out the sale dishonestly—a fundamental element in the prosecution of such a crime. The CPS said that Mrs. Johnson alleged that although she had signed the hire agreement document, the clause prohibiting the disposal of the vehicle had not been drawn to her attention. The burden of proof could not be satisfied, and the CPS was therefore not prepared to prosecute.

It is probably a matter for a future Adjournment debate, but it would appear that the Crown Prosecution Service's advice to the police in Devon—and, for all I know, everywhere else in the country—is that, providing a rascal is cute enough to say that he did not see that part of the contract, no prosecutions can be brought in Devon and Cornwall, or anywhere else, of those who buy cars on finance and then flog them off on the side. That is reprehensible, and I intend to return to the matter in due course.

On 27 May 1999, Mr. Kernick received a letter from Motability Finance telling him that he had 10 days in which to return the car or face court action. Motability was legally right. Mr. Kernick had fallen foul of the principle known to lawyers as "Nemo dat quod non habet", which loosely translates as "Rascals who do not have ownership cannot pass it on to others". The difficulty is that Mr. Kernick is not a lawyer and does not speak Latin. He thought that he might be given a degree of straight dealing when he dealt with Motability Finance, but that was not to be.

On 14 June, I wrote to Motability Finance saying that, although it might be legally in the right, it did not have a leg to stand on morally and that it should transfer ownership of the vehicle to Mr. Kernick without any more to do. I suggested that the firm carry out urgent inquiries to see how many other cars it had managed to lose track of over the years. I also wrote to the Secretary of State for Social Security. I was worried that it might not be an isolated case and that Motability Finance should look to its own records and procedures to find out how many more of its cars had gone missing.

On 15 July, I wrote again to the Secretary of State informing him that I had not received a reply to my letter of 14 June to Motability Finance. The right hon. Gentleman was kind enough to say that he would write to the chief executive of Motability Finance saying that outstanding correspondence should be dealt with urgently. On 13 August, I wrote another letter to Motability Finance expressing concern that my original letter had still not been answered.

At that stage, what might be called low farce entered. Three days later, Motability Finance wrote to me, saying: Unfortunately, we are only in receipt of one letter from you, a copy of which is attached. That was my letter of 14 June, asking the firm to deal with the matter. It did not deal with the points raised in my letter; it simply said that it had come to an arrangement with Mr. Kernick, which consisted of him having his car taken back.

Motability Finance wrote to me on 3 September saying that Mr. Kernick had agreed to buy the car from it. He understood that to mean the auction value of the car and hoped that a process would take place in which they would be able to arrange a settlement figure. On 2 January 2000, Mr. Kernick told me that he had agreed to buy the car but that Motability was dragging its feet on coming up with an acceptable settlement figure. He contacted me again on 14 January to say that he had heard nothing from Motability and that it still had not produced a settlement figure.

Matters went on in the same vein until 10 May when Motability Finance sprung into life, although not to the extent of answering the correspondence that I had initiated in June last year. It wrote: Dear Mr. Kernick Settlement in the sum of £3500.00 We have been reviewing our file and are disappointed to note that you have failed to respond to letter with reference to settlement or whether you will return the vehicle. Under the circumstances we confirm that we will accept the sum of £3,500 in full and final settlement…Please confirm whether you are willing to pay the above amount or return the vehicle. Please confirm your intentions by 20 May…otherwise further action will be taken. Mr. Kernick was not surprised and he passed the letter on to me. I was exasperated and wrote to Motability Finance on 23 May explaining that I had raised specific concerns as long ago as the previous June. I said that if it would not deal with those concerns, there was no alternative but to bring the matter to the Floor of the House.

I received a reply on 5 June, just nine days short of the celebration—if that is the right word to use—of the non-answered letter, which was signed by the fleet operations director. I do not know what type of fleet he directs or how many cars are in it—I suspect that he does not know that—but he said: I am sorry to read of your dissatisfaction and disappointment with us over this matter. I note that there have been many communications between this office and yourself— yes, me saying to Motability Finance, "Will you please deal with the points that I raised on June 14 the previous year."

He went on to say:

The HPI—

hire purchase information— register would indicate MFL to be the owners of the vehicle during those … years. Had Mr Kernick checked with the HPI register. he would have discovered that the vehicle was not Mrs Johnson's to offer for sale. That is almost surreal. Here we have a fleet operations manager, who, I assume, is paid a not inconsiderable amount for such weighty responsibilities, but who allows his cars to be stolen over a three-year period. He did not know about the theft until Mr. Kernick told him, but had the gall to say that Mr. Kernick—an ordinary, straightforward chap who has probably never heard of an HPI register—should have done something about it.

The letter gets worse. It explains why it is easy not to trace vehicles and offers a reassurance. It says: Due to changes in the Scheme, we are not in full control of the servicing, maintenance and buyback obligation of all new Motability vehicles since March 1999. This relieves suppliers of their obligations and allows us tighter control of Motability vehicles. We are confident that situations such as this would be identified and resolved much quicker. There is then what I like to think of as a misplaced attempt at humour. The fleet operations director says: We have a responsibility to the Scheme to ensure that losses are kept to a minimum. Indeed, but my dealings—or, rather, non-dealings—with Motability Finance suggest that it is doing no such thing. There is no doubt about the legal or moral position, but Motability Finance seems to have no control over the vehicles that it owns. It relies on people sometimes exchanging vehicles and initiating an HPI check that reveals a vehicle as missing. That is not good enough.

The real villain is Mrs. Johnson. Motability Finance could get a qualified motor engineer to assess the car's value. It would take responsibility for the loss and sue the original converter. However, they will not do that. Why? Because poor Mr. Kernick is a much easier target. They know where his car is and they can seize it at any time.

I do not know what the car is worth. In the menacing correspondence it started at £3,500 and then went down to £2,900. I carried out some investigation in the motor trade and I am told that, once the Motability snatch squad has lifted it and flogged it at auction, it might, after auction expenses, fetch £2,000. I asked Mr. Kernick to ask a dealer what he might get in part exchange and I am told that that would be about £1,750. However, that is not the point. Motability should undertake a radical assessment of its procedures and write off the relevant sum now. I have no idea what the matter must have cost it in executive time. Its argument might be that there is no slot available in its accounts for the writing off of such sums. However, if it wanted to it could pay Mr. Kernick a consultancy fee equal to the value of the motor car and thank him for drawing to its attention the woeful state of its administration. The idea that Motability will stand by while this ordinary man's car is snatched in the way I have discussed is appalling.

When I decided to bring the matter to the House of Commons I did so quite deliberately because I realised that the Under-Secretary of State for Social Security, the hon. Member for City of York (Mr. Bayley), would respond. I hope that I do not embarrass him too much by saying that I have been extremely impressed by the way in which he has dealt with my constituency correspondence. Whatever our political disagreements, it is obvious from his letters that he takes an active interest. He is not one of those Ministers who simply signs ministerial drafts. That is apparent from the quality of the response and some of the handwritten notes on the letters. I realise that, to an extent, he may, in the present instance, have to play close to his chest. However, I like to think that, if I had been a fly on the wall at the meeting that I assume took place between him and senior officials of Motability Finance Ltd., I would have heard him use the sort of language that he uses when raising a constituency case.

Most people know of Motability and know that it provides money to enable disabled people to buy cars. I do not know under what arrangement with the Government it operates—whether it is under a franchise, for example. But I know that on rare occasions morality does not follow the law. The law points in one direction and morality in quite another. It would be appalling if, in the end, Motability were to send in the snatch squad to take this man's car away. I am sorry that, because of its complete inactivity and unwillingness to explain, I have had to bring the matter before the House of Commons. However, that is the ultimate redress for any British citizen.

12.42 pm

The Parliamentary Under-Secretary of State for Social Security (Mr. Hugh Bayley)

I start by thanking the hon. Member for Teignbridge (Mr. Nicholls) for his kind remarks about me. I also thank him for bringing the matter to my attention and that of the House, both because of the issues about Motability that it raises and because of the consequences for his constituent. Of course I appreciate how distressing it must have been for Mr. Kernick to find out that he had no legal title to the vehicle and I am sorry for the delays in dealing with his queries. I am grateful to the hon. Gentleman for letting me see an early draft of his speech, which helped me to prepare answers to try to end the uncertainty faced by his constituent.

The facts of the case are relatively straightforward. In February 1996 Mrs. Johnson, who lives in Newton Abbot, made an agreement to lease a Ford Escort from Motability Finance Ltd., and seven months later Mrs. Johnson disposed of the vehicle to Mr. Kernick, although she did not own it and did not have the authority to sell it. It had been supplied to Mrs. Johnson by Newton Abbot Motors, who, under the Motability rules, should have recorded the vehicle's keeper on the Driver and Vehicle Licensing Agency's V5 document, the log book, as Mrs. Johnson, care of Motability Finance Ltd. Instead, it put Mrs. Johnson's home address on the document. That error might have given Mr. Kernick false reassurance that Mrs. Johnson was selling her own car.

However, I must make it clear that there is no legal requirement for the V5 document to carry a reference to any leasing or hire purchase owner. It is always advisable for a buyer to perform a hire purchase index check to find out whether any other party has an interest in a second-hand vehicle before parting with money for it. Unfortunately, Mr. Kernick did not do that, as the hon. Member for Teignbridge said.

MFL did not find out that Mrs. Johnson had sold its car until March 1999, because she continued to pay her lease charges to MFL until then. MFL took lawful action to recover the car from Mr. Kernick. The authority for its action comes from section 21(1) of the Sale of Goods Act 1979, which says that where the goods are sold by a person who is not their owner, and who does not sell them under the authority or with the consent of the owner, the buyer acquires no better title to the goods than the seller had. I have a great deal of sympathy for Mr. Kernick and, within the constraints of the law, I should like to do whatever I can to help him. The hon. Gentleman made it clear that the problem that Mr. Kernick faces was created by Mrs. Johnson, who sold him a car that she did not own. Some of the blame should also lie with Newton Abbott Motors, which failed to register the keeper's address properly as care of Motability Finance Ltd., as it was required to do as a Motability supplier. I shall shortly return to discussing what can be done to seek repayment from those responsible for the losses incurred.

First, I shall comment on the situation that faces Mr. Kernick. I understand that, in September last year, he asked MFL what he would have to pay to buy legal title to the car. MFL did not reply until last month, when it offered to accept £3,500 in full and final settlement. I am concerned about the delay in making that offer and I discussed it with MFL. It said that the delay occurred in part because of MFL's wish not to put pressure on Mr. Kernick, because it knew of his poor state of health. That is not a convincing explanation for the delay.

Mr. Kernick believes that MFL is asking too much for the residual value of the vehicle, and several lower prices have been mentioned in the debate and the correspondence that I have seen. The most recent figure is an estimate of the current auction value in the hon. Gentleman's letter to MFL dated 15 June.

It is not for me to negotiate a price. I do not own the vehicle and it would not be right to discuss that issue on the Floor of the House. However, I can tell the hon. Gentleman that I saw the chief executive of MFL yesterday in my office. He assured me that he is willing to agree a fair price for the vehicle and that he understands the need to do so quickly. If, for example, both parties took the figure mentioned in the hon. Gentleman's letter as a guide price, the matter could be settled within the week.

At yesterday's meeting, I also asked the chief executive what action he would take to recover his losses from the parties whose actions caused them. He assured me that MFL would commence legal proceedings against Mrs. Johnson. He also explained that MFL could not seek damages from Newton Abbott Motors for failing to register the right details on the V5 document, because the company no longer exists. It went into receivership and was sold to Evans Halshaw, which took over responsibility for maintaining Motability vehicles supplied by Newton Abbott Motors. I have asked the chief executive of MFL to find out whether Evans Halshaw also took over liability for the omission by Newton Abbott Motors.

Mr. Nicholls

I am grateful for the Minister's response, which is everything that I expected. If Motability belatedly realises that it should take action against Mrs. Johnson and it is prepared to issue proceedings against her, surely the least that it should do—it should of course wipe out Mr. Kernick's problem—is try to recover the vehicle's present value from Mrs. Johnson and pursue Mr. Kernick only if that does not work?

Mr. Bayley

I will pass that comment to Motability Finance Ltd. to consider when instructing its lawyers.

The hon. Member for Teignbridge raised some wider policy matters. He said that MFL should take a closer interest in what happens to its cars. Until March last year, the dealers who supplied MFL vehicles were responsible for maintaining them and for buying them from Motability Finance Ltd. at the end of the lease. Unfortunately, that arrangement permitted the problems to which the hon. Gentleman drew attention when the dealer fell down on its duties. However, since March 1999, MFL has taken direct responsibility for control of maintenance arrangements and the sale of lease and vehicles. That involves an in-house audit trail on the vehicle's activity throughout the life of the lease.

Motability and Motability Finance Ltd. assure me that correspondence from Members of Parliament will be handled either by Motability or by the chief executive of Motability Finance Ltd., who asked me to apologise on behalf of MFL for the way in which hon. Members' inquiries were handled. Mobility is aware of the importance of a speedy response whenever possible. It has a customer commitment to answer in full or to let the correspondent know within four days of receiving a letter what is happening to the case.

I apologise to the hon. Gentleman because my Department has been slow in answering some of his letters, and I have not yet replied to letters written immediately prior to the debate.

It is a pity that this case occurred, as the work done by Motability provides valuable help in assisting severely disabled people. At present, 380,000 cars are leased through the scheme. Motability works constantly to ensure that the service to disabled people fulfils their needs and that dealerships acting on behalf of a scheme meet Motability's high standards. It operates an accreditation scheme for dealerships to promote a first-class service to its customers and I regret that the actions, or inactions, of the dealership in the case in question should have caused the hon. Gentleman's constituent such problems.

The case brings home an important point: anyone purchasing a car should take precautions to ensure that the vendor has the right to sell the vehicle. The Office of Fair Trading produces a useful leaflet, entitled "Buying a used car", which contains information on checking whether a vehicle is subject to a financial arrangement with a party other than the vendor. It also contains details of whom to contact should a person have difficulties with the dealer from whom they bought the vehicle.

Now that the issues in the case have been brought to light and examined by MFL, I hope that everyone involved has learned lessons and that it will not be necessary for any hon. Member to bring a similar case to the House. The new procedures introduced by Motability Finance Ltd., in which it takes direct control of the management of the car during the period of the lease, will provide greater safeguards, although it will not deal with every case in which a Motability customer seeks to abuse the system. Motability and MFL are aware of that and, although their handling of this case is not a good example, their wish to counter abuse of the system is at the forefront of their objectives.

The hon. Gentleman asked how many cars that are registered to Motability Finance Ltd. are currently missing. MFL is pursuing the return of 23 cars that were sold in circumstances similar to those that we are considering today. That is a small number when compared with the total number of leased cars in the scheme—approximately one car in 15,000—and lower than is achieved by most leased schemes, but it is still too high. I have therefore asked my officials to explore with the DVLA in Swansea whether the V5 form could be changed to reduce that number.

Finally, it might be helpful if I explain the links between Motability, Motability Finance Ltd. and the Government. Motability is a charitable company, incorporated by royal charter. It was established in 1977 as a partnership between the Government, charitable and private sectors to help disabled people to obtain vehicles on favourable terms by using their disability living allowance higher rate mobility component or war pensioner's mobility supplement.

Motability Finance Ltd. is a private company, which works to meet the objectives and service levels established by Motability. It is owned by a partnership of five major clearing banks—Lloyds TSB, the Bank of Scotland, Barclays, the Royal Bank of Scotland and HSBC—which provide finance at preferential rates. The lending facility by the banks has increased over time from an initial £100 million to the current level of more than £3 billion. They provide finance to purchase the cars, which are then provided to disabled people on contract hire agreements, and are reimbursed by the diversion of disability living allowance and war pensioners' mobility supplement payments from my Department. That is a massive financing commitment, and the Motability scheme could not exist without the banks' support. I believe that it is the biggest car leasing operation in the world and accounts for 7 per cent. of new car sales in the UK.

My Department acts as a sponsor of the Motability scheme, although we are not involved in operational matters. The rules, terms of the agreement and administration of the scheme are for Motability to decide, in consultation with their service providers. However, by virtue of the diversion of customers' disability living allowance to pay Motability lease charges, we have some influence over aspects of the scheme. The fact that payments for vehicles are made from disability living allowance, and that the scheme benefits from concessions on VAT and corporation tax, means that there is a direct Government interest in the working of the scheme.

Those concessions, along with the direct negotiations between Motability, Motability Finance Ltd. and car manufacturers, mean that the scheme can provide disabled people with transport at an advantageous cost. Motability customers can obtain cars for as little as £24.99 a week. The lease provides not only access to the car, but insurance and AA or RAC assistance.

I am grateful to the hon. Gentleman for drawing the problems in this case to my attention. I should also be grateful if he would pass on my sympathies to his constituent. As I have explained, Motability Finance Ltd. is an independent private company, and I cannot therefore issue it with an instruction. However, I hope that a satisfactory agreement between the parties concerned can be reached in the near future.

Question put and agreed to.

Adjourned accordingly at two minutes to One o'clock.