The High Court has allowed Lombard and Ulster Banking Ltd to rescind its contract with Mercedes-Benz Finance Ltd over the proposed sale of three second-hand Mercedes trucks, after finding that the bank did not receive the ownership and possession it had contracted for.
Mr Justice John MacMenamin delivered judgment on 11 January 2006 in proceedings brought by Lombard and Ulster. He found that the consideration for the contract had wholly failed. The court did not decide damages or costs at this stage, saying it would hear counsel on those matters.
The dispute arose from a 1998 transaction involving three trucks previously financed by Mercedes-Benz Finance. Vincent Hughes, the second defendant, sought finance of £40,000 from Lombard and Ulster to acquire the vehicles. An invoice from Mercedes-Benz Finance listed a total price of £62,667.56, with a stated deposit of £22,667.56 due from Hughes. Lombard and Ulster transferred £40,000 to Mercedes-Benz Finance. The deposit was not paid.
The bank’s case was that it understood it was buying the trucks and that Mercedes-Benz Finance would transfer title. Its witnesses said they did not know the transaction was a refinancing of Hughes’s earlier agreements, or that two trucks remained in his possession. Mercedes-Benz Finance argued that the bank had taken the risk that Hughes would pay the deposit, and that it retained ownership under the invoice’s reservation-of-title terms until all sums were paid.
The judge found that Lombard and Ulster was entitled to assume Mercedes-Benz Finance owned all three trucks and had them in its possession. In fact, he found that Mercedes-Benz Finance had no title to the 1991 truck, while Hughes had possession of the other two. The judgment also records that a payment of £6,384.89 by Hughes in August 1998 was not accounted for in the stated deposit figure; the judge said it was unclear why it had not been deducted.
The court concluded that the bank had not received the property and right to possession for which it paid. It also found material facts about Hughes’s history with the trucks and the possession of the vehicles should have been disclosed. The judge said there was a strong suggestion of intentional failures of disclosure by Hughes that might amount to deceit, but framed that as a suggestion rather than a finding of deceit.
The court held that the contract was rescinded, including on the alternative basis that a condition precedent requiring payment of the deposit had not been fulfilled. The judgment does not state an award of damages or costs; those issues were reserved for further submissions.