Although this case is about a trustee in bankruptcy’s fight to realise his interest in a property by virtue of a debtor’s bankruptcy, the facts (though extreme) are not untypical of a finance company’s position when a hirer refuses to return goods to it despite the fact the court has ordered the hirer to do so.

In this case Mr Canty was made bankrupt in relation to a relatively small debt and he never accepted the position. There followed a number of appeals and challenges over the following years in which he attempted to reopen and relitigate earlier proceedings.

The trustee in bankruptcy obtained an order for possession of Mr Canty’s property. Mr Canty refused to hand it over and eventually took to the roof of the property to continue his protest where he stayed for some nine months. Some four years after having obtained his first possession order, the trustee in bankruptcy finally applied to the court for Mr Canty’s committal for contempt of court following his failure to comply with a penal notice endorsed on the possession order. After adjourning to see if there were any other options available (and with Mr Canty still on the roof) the judge held that Mr Canty was in contempt for failure to comply with the penal notice and sentenced Mr Canty to six months in prison.

Mr Canty appealed to the Court of Appeal as regards both the committal and the length of the sentence. The Court of Appeal found that Mr Canty’s wilful and deliberate breach had been maintained and the appeal failed.

The decision shows that the courts are willing to take a hard line with those who persistently ignore court orders. It is a useful reminder to finance companies that although penal notices, and in particular committal proceedings, are extreme and draconian measures, they are effective remedies and available to them against hirers who persistently refuse to comply with delivery up orders.

Non-binding Protocol for settling dual finance cases

The Finance & Leasing Association, in consultation with its members, has put together best practice guidelines that finance companies might wish to follow in situations where two finance companies claim to be the owner of a car. This usually happens where the dealer has gone out of business and has failed to sett-off outstanding finance. Full details can be found on the FLA website and the Protocol is still in draft form (and comments are welcomed on it).

In summary the Protocol suggest the two finance companies should do the following:

  • Finance company A should supply finance company B with a copy of the agreement, a copy of the invoice from the original supplying dealer, a copy of the statement of the balance on the account, a note of settlement figure at the time of the conversion by B, and any details of any known transactions leading up to the sale to B (if known).
  • B should within one month of receiving A’s request either pay the settlement figure at the time of the conversion or the amount of the conversion, whichever is the lower. B should agree to waive the interest due since the conversion in recognition of the fact that B is effectively paying out twice on the same vehicle.
  • If the matter cannot be resolved amicably, the FLA’s assistance should be sought. The FLA will liaise with senior representatives of each company.
  • If the matter cannot be resolved within two weeks of that referral, the parties may pursue legal remedies. If you have any comments on the draft protocol I would be happy to feed them back to the FLA on your behalf.